Sunday, February 3, 2008

Lenders, Mortgages and Credit Scores, Oh My!

In my first post, I revealed that I just recently purchased a house. What made me do such a crazy thing, you ask?

Well, thanks to the rather horrific neighbor that moved in next door here at my apartment, I started shopping around for another place to rent. I got a bit of sticker shock when I started looking. Most of the apartments around town are 200 sq ft smaller and $200 more expensive than where I live right now. So I decided that if I'm going to be paying more for a place to live, I might as well be getting something out of it.

The first thing I did was poll my family. Being single and having been through a bad financial situation a few years ago, I wanted to gauge what experienced home buyers thought my chances were. The resounding consensus was "you'll never know until you try."

OK, that helps, and there's constant news about falling interest rates. But what to do now?? I admit I made a few missteps that didn't really throw me off track, but did slow me down. I thought I would pass along what I learned to other non-number centric first-time homebuyers like me.

1. Do what benefits you the most. Do not stray from this. It has been my mantra from the beginning and I have not been shy about sharing it with my realtor and lender.

2. Determine how long you will actually stay in a home. If your job is going to be moving you within the next year or you're planning on running off to Montana to marry the guy you met on eHarmony, stick with renting. If you are staying put for 5 years to 10 years, find yourself a nest to call your very own.

3. There's no such thing as "no money down." You might be able to purchase a home without making a down payment, but there are still closing costs, earnest money, and inspector fees that you have to come up with.

4. Remember that lenders only look at what's on your credit report--they don't take into account what you need for utilities, medications, food, child care, insurance, etc. Make certain you know exactly what you can spend on a monthly mortgage, property taxes and home insurance. And don't forget budgeting for higher utility bills. Bigger space=more energy used.

5. Get pre-qualified for a mortgage. Your lender can run some good faith estinates for you that can estimate what your monthly payment will be. This will help you narrow down the price range you should be looking in. Don't get in over your head like many Countrywide customers found themselves.

6. Forget you ever heard about adjustable rate mortgages. 'Nuff said.

7. For those who need hand-holding, I recommend skipping the online lender sites. That first heady blush of all the attention is great, but they don't know you, and they are out to do what's best for their banks. (I can only compare it to the experiences I had with online dating--not good!) I did not speak to a single one who was willing to actually spend the time to educate me so I could make a better decision, and with all the different terminology each one used, I was lost in the miasma and ready to just cancel the whole process. It was very hard to separate the truth from the sales pitch. I'm sure there are people who will give glowing recommendations for shopping online for mortgages, but I prefer a more personal touch.

Poll your friends, relatives, and co-workers and find a local lender who puts his customers' needs first. I finally dumped all the banks that had contacted me from my online application and went with a local guy who came highly recommended to me by my good friend S.G. John was kind enough to spend two hours talking with me and educating me about mortgages, mortgage insurance, and the differences between FHA and conventional loans. No question was too stupid and his patience was unending. Not one of the others had bothered to even answer questions I had posed to them. Because of his honesty, plain speaking, and dedication to getting the best loans for his customers, John won my business hands down. (If you're in the Denton area, holler at me and I will pass his information on to you.)

Once I got past the quicksand that is financing, I was able to concentrate my home search on houses within my price range. No more dreaming and wishlisting about those multi-story homes with master baths you can live in. Tales about my home search are to come.

Thirty-seven days until closing....

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