How do you decide which vendor to use? What things must you look for in each?

When purchasing a home, these three professionals are very important to getting your deal closed, whether you are the buyer or the seller, but first let’s look at it from a buyer’s prospective.

Know Your Credit Rating

Before starting your search for a lender, I suggest you pull your own credit report from all three credit reporting agencies. There are several free sites on which to do this. Look at www.clarkhoward.com for recommendations for obtaining free credit reports, but be sure you stay on his site and not wander off by selecting advertising links. Clark is our consumer advocate here in Atlanta and a great source for saving money!

Lenders: As a buyer, this is probably your most important decision (after you chose your real estate professional, of course!) Get recommendations from your real estate agent (if you’ve already selected one) or family and friends. Make sure it’s someone who has a bricks and mortar location, not an online financing institution. Many closings end up not funding due to the inability of an online lender being able to fund. You don’t want to end up at the closing table only to find out it’s not going to happen. In this market, it’s imperative that your lender be a stable source.

I always recommend to my clients that they talk with at least three different lenders and speak with each concerning your income and credit history, what type of loan you are looking for (term/payment amount), how long you plan to be in this home and any special programs you may qualify for. Do not have them pull your credit until you make the decision of which lender you wish to go with, as this dings your credit report each time.

Make sure each quote includes:

1. Escrow account creation amount– if you don’t have your home selected yet, this can be estimated based on the loan amount you qualify for and the county/counties you may be looking in. This is the part of your payment that will pay your taxes and insurance (billed to the mortgage company vs. you) when they come due. Normally, three to four months is collected up front, depending on when you close and when those bills may be coming due. This is considered part of your “up front” closing costs.
2. Rate of interest and term of the loan.
3. Loan origination fee.
4. Attorney fees. This is what the title attorney who closes your loan will charge for his/her services, normally $400.-$450.
5. Title Insurance. Make sure you are getting quotes that are “apples to apples”. For instance, make sure they are ALL including Owner’s Title insurance when quoting the cost of title insurance. This is the coverage that protects your down payment. The lender will require you purchase a title policy to cover UP TO the amount of the loan, but anything over that (your portion) is not required, but it is certainly recommended. Many times when looking at a good faith estimate, the Owner’s Title policy won’t be listed. As this can be several hundred dollars, you want to be sure all your quotes are the same.
6. Any document preparation charges, underwriting fees, etc.

Once you have found who you are most comfortable with, ask them to match the best deal you have found among those you have interviewed. It is critical that you feel comfortable with your lender and confident of their ability to get the loan processed on time and at the costs quoted on the Good Faith Estimate. It strengthens your position greatly to have already completed this step BEFORE you start to find a home.

Pulling your credit report and finding and correcting any errors on it can save lots of time and aggravation later. It’s also extremely hard to settle on a home you can really afford if you’ve been looking above your price range by not completing this step FIRST.

Now armed with your pre-approval letter, you are ready to find your dream home.

Get started with the right AGENT, next in part 2 of Lenders, Agents, Inspectors, OH MY!!