Apples to Apples: Managing the Mortgage Maze

If you think shopping for a home loan is easy, you may not have gone through the process in awhile.   While online mortgage rate sites abound and are designed to make you think it’s easy to pull up a rate with the click of a mouse, fooling consumers into thinking they’re comparing “apples to apples,”  the reality is there is much more to loan shopping than a few mouse clicks.

I’ve been in the real estate business for over 7  years and even after helping sell any number of homes, I’ll admit getting an apples to apples comparison on mortgage rates still has me a bit overwhelmed….especially given today’s market and the new tightened qualification standards required by lenders.  I’m betting that if I’m overwhelmed… and this is my field…..it’s very likely YOU are looking for answers, too, no matter if this is your first time buying  home or the the 5th!

The changes today can be mind boggling…and they’re not exactly front page news (Well, actually today’s news  that the Federal Reserve will keep rates low through mid-2013 IS front page…and great for home buyers).

Here are some points I found interesting in a recent lending workshop–they should help you make a better apples to apples comparison when you’re loan shopping:

1. Don’t take too long to compare lenders.  A lender may be able to qualify you today, but 30 days from now may not be able to offer the same program with the same terms.  Take detailed notes and make sure you are comparing the same loan terms.  Your real estate agent can help (if you’re buying and ready to put in a contract) by securing a long financing approval date on the sales contract.
2. Rates not only can change daily, but can swing throughout the day!  Yes, indeed!  Dawdling is not rewarded in today’s market.  When you’re ready to shop for a loan, have your potential lenders listed and ready to call.  If possible, try calling them within the same hour to be sure you’re comparing actual apples-to-apples.  Small variances can really affect your loan.
3. Know your programs.  You’re likely aware of the standard Conventional, VA and FHA loans.   Ask about new ones.  These come out all the time and can significantly vary from lender to lender.  Why? Lenders partner with banks or other institutions which allow them to offer special programs.  Ask detailed questions and be sure to get expiration dates.  The prevailing perception is that you MUST have 20% down to qualify for a conventional loan…not true in all cases.  Certain lenders (and this does NOT mean they are shady) can offer programs that lesson the amount down.
4. Know your credit score, but keep in mind that lenders have much more stringent standards for coming up with your score.  The one you pull online may not match the one the lender comes up with.  Significant changes are in place right now that may inpact how much you can afford, so check the new rules.  Old “low” scores that qualified are being thrown out, with the new “lows” being MUCH higher.  You might have been able to get a loan with a 680, but now will need a 720, for example.
5. Loan limits are LOWER.  This is a big one.  As of September 30, 2011, the Jumbo loan limit will be 625K down from 729K, meaning you may not be able to buy the house you thought you might.  Most lenders will cease taking new applications for these old Jumbo loans NEXT WEEK since , if they deals aren’t closed by September 30th, they can’t offer the deal to the buyer.
6. Appraisals are tighter.  The reality of the mortgage squeeze is that appraisers are having to justify the cost of the homes.  New guidelines will be in place in September requiring 5 comparables as opposed to the old 3 to determine pricing trends.  A good real estate agent will be able to help you with this.