How to best navigate today’s mortgage market
We found this article interesting from The New York Times. They are correct on a major point – failing to shop for a mortgage is the worst type of sloth. On the other hand, shopping for a mortgage does not have to be the root canal they describe. Benchmarking your first quote may significantly improve results. While the underwriting process can be still likened to root canal surgery, mortgage shopping can be fairly painless with the right research and support.
Here are 3 simple recommendations:
1) Shop using relationships. Use at least 2 or 3 mortgage bankers recommended by your Realtor or personal financial planner. Get a good Faith Estimate from each and compare all aspects of their offers. A good realtor will always recommend a mortgage banker that has shown reliable performance in the past. Heery Brothers works well with several experienced and trustworthy mortgage bankers that have delivered great result for our clients. Please see our financing link above (Under Resources).
2) Only get a mortgage if you can afford to buy the house: Sounds simple enough, but what exactly do we mean? Here is a good rule of thumb – If you cannot afford the house you want with a 75% loan to value 30 year mortgage, then find a less expensive option. Some of the ardent anti-debt people would have more extreme rules of thumb than that, but this is a reasonable one. After you determine that you can come up with the 25% down payment and afford the mortgage, then explore the most cost effective options (before and after tax).
3) Mortgage bankers have limited (if any) control over the underwriting and appraisal process. The good mortgage bankers that we recommend will advise on the best product and establish realistic expectations.
Purchase money mortgages close much faster than refinancing. In the case of either, be patient. Debt is a tool – often abused, but used in the right way it is very powerful. In the current environment where the spread between mortgage rates and returns in investment are so favorable, the right mortgage is an important part of your financial life.