I know, I know, buying houses is the worst. It’s not a fun thing to do.
It’s not like buying a new car or a new TV, or even a new house. But it’s a necessary evil unless you have a lot of cash.
The reason it’s not fun is because there’s a lot of math, paperwork, and high-pressure salespeople involved.
Not to mention a lot of mortgage lingo that may be going through your head.
But there is a silver lining to putting in all that shopping time; you will learn a lot about mortgages.
I get it, Mortgages Are Not Fun
Look, I’ll be the first person to tell you that mortgages are boring. It’s been almost 20 years since I wrote about them.
And before that, I was working on the frontlines with real estate agents and loan processors and underwriters.
Nothing was fun, and probably not that much fun when you’re new to it and trying to get through it.
On the contrary, you may be in a hurry to buy a new car and do test drives while checking out all the nice features.
The same goes for new clothes, a new TV, computer, etc. They call it retail therapy for a reason.
I have never heard anyone say that buying houses is a lifesaver. In fact, it’s often quite the opposite.
Often, people say they would rather go to the dentist than go through the loan process.
Okay, so what’s the point here? However, as mentioned, you can learn a lot if you shop around.
Learn About Home Loans As You Shop Your Rating
Most people don’t shop around to get a home loan. They may just go with the lender on their real estate recommendation, or the first quote they come across.
Again, this is because mortgages are never fun. And not finding anything funny.
This not only costs people (as studies prove that more citations lead to lower rankings), it also means you won’t learn much.
And, I understand. Most people are just trying to get through it so they can move into their new home. Or enjoy a new lower rate on your existing mortgage in the case of a repurchase.
But unless you’re likely to pay more, you’ll learn less. And the less you know about something, the more likely you are to make a bad decision.
For example, you may choose the wrong mortgage product for your individual situation.
Or you may be told to pay discount points at closing, only to sell your home or refinance before the closing period.
You may refinance even when it doesn’t make sense to do so. Or you bought a lot of house and became poor because the numbers were presented to you in one way.
Bringing it full circle, you may also be excluded because you will be novices and easily taken advantage of.
If you actually make a few phone calls and talk to a lot of loan officers, real estate agents, etc., you will learn more about all the ins and outs.
Every time you talk to a new person you will have more information than the previous call.
And this will help you avoid common gotchas and maybe allow you to be more confident. That can lead to better loan price negotiations and ultimately a better chance of a lower rate.
Here are some tips on how to shop for real estate
If you’re stressed about your credit scores, remember that while mortgage inquiries can lower your credit score, they’re usually not bad.
You also don’t need to let everyone else manage your credit. And FICO now consolidates multiple loan inquiries into one when they are made within a 14- to 45-day window.
Those who have heard of those annoying fireworks can use a strategy I laid out years ago.
Use a temporary phone number like Google Voice for free. Share that number with all lenders, brokers, etc.
Then discard it once you get a match and continue with your original number. Or keep using the temporary one!
Even if you use a mortgage broker, take the time to compare real estate agents. Because many of them just send all their business to one lender. So it’s not really shopping around.
In addition, they have different compensation structures, which means that if you compare more than one you may end up with a broker who pays less per loan and saves you money.
For example, one salesperson may earn 2% on each loan, while another is content with a 1% origination fee to get more volume. A lower income seller will likely have a lower price and closing costs.
Finally, if you already have average or poor credit, know that loan rates can vary greatly, so shopping around is very important!
Simply put, prices are in a tighter range for those with the highest FICO scores. But even those people should also collect more than one quote!
Read on: How to buy a mortgage.
(Photo: Alan Levine)
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