When most people start looking for their first home purchase, they start by searching ads, listings and even neighborhoods for the house they might want. They view it a time or two and make an offer. Then they begin looking for financing. All too often, they aren’t able to obtain enough funds to purchase the home they want.
Instead, start your housing search by knowing exactly how much you have available between your down payment and your mortgage availability. You increase the odds of having a bid accepted; it reduces closing times, and you increase your satisfaction in your chosen property.
Agent or Institution?
An experienced real estate agent has a reasonable idea of how much you can spend. For one element, you provide your price range. For a second, a responsible agent will complete a buyer’s profile and have a good idea of your income figures to prevent overstretching wants with abilities.
When you find a good house, the real estate agent can recommend either a lending institution or a specific loan agent that has an excellent reputation for fair and fast loan evaluations and processing.
However, if you seek financing from an “institution,” such as a bank or a savings and loan, not all lenders adopt the same lending philosophy. Know the differences between them before you complete an application.
Mortgage Bankers: Mortgage bankers are usually large banks that initiate and generate pools of loans that they sell to organizations such as Fannie Mae, Ginnie Mae, Freddie Mac in the US, for example, and others.
Mortgage Brokers: Mortgage brokers aren’t always banks but companies that originate loans which are sold to wholesale lending organizations and institutions. A broker may write the contract, but the underwriting or funding of the loan is done by the wholesale lender.
Wholesale Lenders: These organizations comprise both banks and portfolio lenders. Some wholesale lenders have individual branches while some solely utilize brokers for loan origination. Branch offices often offer mortgage brokers lower rates than wholesale branches offer the general public who walk through their doors.
If interested in a wholesale lender’s loans, seek an associated mortgage broker for potential savings, but compare rates that carry throughout the life of the loan. However, the mortgage broker may add his fees to your purchase amount, and that addition may escalate your loan enough where you experience no actual savings.
Portfolio Lenders: If you have approached a bank for a mortgage, but your application was not successful for some reason, all hope is not lost. Portfolio lenders often have slightly different criteria for lending or a more varied pool of loans available.
Portfolio lenders are usually savings & loan (S&Ls) institutions, but banks might be as well. S&Ls usually carry adjustable-rate mortgages much more often than standard or fixed-rate mortgages. The loans, however, are usually not offered for sale to another institution in the secondary market: If you start with an S&L loan, you’ll probably repay the entire loan to that S&L.
You might find a more comfortable reception by a portfolio – a pool of self-originating loans – lender with their adjustable-rate mortgages, but know the ranges of interest rate adjustments and timing of them before you sign the loan paperwork: Ensure you can afford all costs – high, low, direct or indirect – of an adjustable-rate loan. Never count on only the lowest payment in your budget forecasts.
Provided by fife estate agents, the leading realtors of Edinburgh City, UK.