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I have been looking for a home in the US, I am a first time buyer and was wondering if someone with more experience than me can recommend ways to find a good lender? I started off by talking to my personal bank and I am currently working on getting pre-approved and plan to apply to other standard banks in the area and compare. Plan to borrow 250k-300k and to put down 20%. Are there specific lenders that are recommended / specific ones I should avoid? With an income of 110k and home-credit score at about 630's what is the best way to go about getting a loan and ensuring the monthly payments and interest rate are lowest? Lastly, any tips / tricks that are learned through experience, that would facilitate things during the mortgage process, would be greatly appreciated.

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    When you are shopping around, don't forget to look at credit unions. – Ben Miller Dec 8 '15 at 12:50
  • On my first mortgage, I had a mortgage broker shop around for me, just because I had ennough other things to worry about during the purchase. I did it myself when I have refinanced since then. These days it starts with a lot of annoying websearching... which is at least better than a lot of annoying phone calls. No tricks other than "shop around, do put enough down to avoid PMI, avoid property that needs flood insurance if you can, and you may get better rates with a better credit score." Specific lenders would be out of scope; too case specific and becomes obsolete too quickly. – keshlam Dec 8 '15 at 14:33
  • One of the most important questions first time buyers don't think to ask - when can you close my loan? Some lenders might say it takes them 60 days or more to close! Smaller, local lenders might be able to close in a few weeks. The point is, ask and see what you're getting in to. – JPhi1618 Dec 8 '15 at 16:17
  • Seconding credit unions - in addition to feeling good cause you're keeping your money local, they also often have much better rates. (Though I'm sad to see that at the moment, our local credit union that a couple years ago offered us a ridiculous 2.625% 15 year rate, is currently just offering the same rate as Chase. Lame. I'd still use them over Chase if I were getting a mortgage now, though, for other reasons.) – neminem Dec 8 '15 at 18:03
  • Do you have a real estate agent? If so, that person most likely has long standing established connections with lenders, see if they can help you out. If not, find a better agent. Also, what's the deal with your credit score? Pull your credit report and fix it up before finding the lender to ensure you get the best rate possible (we're talking $$$$ here over the life of the loan). – RandomUs1r Jul 20 '17 at 21:51
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Its work and shopping around is not always easy. Its often difficult to compare loans. One thing you are going to struggle with is a low credit score. Typically the best rates are for those above 700 or so, each lender differs a bit.

One thing you did not mention is your current debt-to-income ratio. That also plays into this. What is that like?

You might profit from taking steps to either reducing your debt-to-income ratio, which will probably raise your credit score. In my own case, my credit score went through the roof as I paid off debt and closed accounts despite the conventional wisdom of leaving accounts open, but paying them off.

Many times banks will not give you a quote without a hard pull on your credit, which will lower your score. This is the tricky part, how do you shop around without getting your credit pulled? So, I'd talk to people that you know who have similar priced houses. Who did they use? Did they like them? With the low interest rates many people you know probably refi'd recently so you will have some up-to-date data.

For me, I have had 3 lenders and have found Regions Bank to be the best. I don't work there, but they have low rates, did what they said they were going to do, did not sell my mortgage, and have good online tools to interact with your mortgage. I fell that last one is pretty important. They are mostly in the southeast however.

  • Isn't in true that all hard pulls for mortgages count as a single pull if they're within 30 days of each other? In other words the 5th mortgage offer you get isn't automatically worse than the 1st just because it is the 5th. Banks understand you're shopping around not getting 5 simultaneous mortgages. – Dean MacGregor Dec 8 '15 at 15:16
  • You may be correct @DeanMacGregor, however, I don't trust banks to be that smart. – Pete B. Dec 8 '15 at 15:18
  • I have about 3-4 old hospital bills from 08-09 totaling about 1k. Other than that, no debt at all... – AnchovyLegend Dec 8 '15 at 23:31
  • @AnchovyLegend why not be done with those before the end of the year? They might even be willing to settle for less. – Pete B. Dec 9 '15 at 13:44
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To me the most important thing is to use a local lender.

Mortgages are complicated transactions that take a fair amount of coordination between you, several other parties, the bank, and the seller. They require a lot of paperwork being done correctly and in a timely manner. They also require your bank to be responsive and timely as well; a slow bank can scuttle a closing very easily.

If you use a national lender, you probably will have a 1-800 number to call, and a multi-step process to get to whomever is working on your loan. You can't walk into the bank with your paperwork and have someone look it over to make sure you've got everything and signed all the right places. You can't walk in and ask how things are going.

National lenders also can get over-booked at times - as my first mortgage lender did, back in the "real estate sale, everything half off" period around 2010-2011 - and simply not have time to manage your loan effectively.


As far as rates go, they don't vary all that much by bank in my experience. Look about online for what the 'national' banks are offering for your loan amount and approximate credit score, and then call around to a few local banks that are bigger players in the mortgage industry in your city. They shouldn't need to do a hard pull (or even a soft pull) to tell you what rates they'll offer someone in your situation, any more than the online national bank sites would have to. They have rate strata that have particular cutoffs - have at least X credit score and Y income for Z loan-to-value ratio ($ of mortgage divided by $ value of house), and you get this rate; change X or Y or Z across this line and you get a different rate. Pull is necessary to actually lock in the rate, but not to tell you what the rate is.

When I went for my last refi, I called my "national" lender (who'd bought my previous loan) and my "local" lender (who I'd originated my then-current loan from), gave them both the same information; they each came back to me with a rate. The local bank's rate was a bit lower, and I preferred the local bank for the reasons above, so went ahead with that, and they did the pull and confirmed it the next day. If I'd not liked what they'd said, I would've looked at a couple of other local banks and asked the same question.


Finally - as to your specifics. 110k income for 250k mortage is plenty to be in the lower strata, but 300k it's not quite enough for the lowest strata I don't think. 630 credit score won't get you in the best strata of course but it's not terrible, either. 20% down is good, 25% down would be better if you could - 75% LTV ratio is where you get the best rates (though 80% is enough for no PMI, of course). Improving that 630 would be nice, particularly if as Pete notes you can reduce your Debt:Income ratio, but don't do it at the cost of a higher LTV, particularly if you cross into needing PMI. Don't forget payments to CCs will not take effect right away on your credit - they'll take up to a month or so to show up, typically (whenever the CC reports) - and other loans could take longer.

  • If you find having a local lender is important ensure that they will be the ones servicing your loan and that they aren't going to sell your loan. Otherwise you'll most likely end up with some national loan company that won't provide good service. – Arluin Dec 8 '15 at 18:53
  • @Arluin I'm specifically concerned here with the issue of origination - I think the matter of selling/not selling is a separate one, and not one I'm nearly as concerned with (personally, anyway). – Joe Dec 8 '15 at 18:56
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The best thing you can do is to get your credit report and ensure that there are no errors. You can get this for free once a year from each of the big credit bureaus (equifax, transunion, experian).

If there are no errors the next thing you can do is to pay down debt. This could be as simple as paying off your monthly credit card bill early so that when your lender pulls your credit your debt utilization will be as low as possible.

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Use an "Upfront Lender" - that is, one who clearly lists and guarantees lender fees, rate lock requirements, third-party fees, and ARM data.

But also, do your homework first. On that front, I heartily recommend the inventor of Upfront Lenders - The Mortgage Professor, whose site is loaded with easy to understand information every home buyer needs to educate themselves on what type loan to get, and where to get it

http://www.mtgprofessor.com/

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