Long Beach Real Estate-Long Beach Condos

Loving Your Home Loan

Here's the final lesson for how to get a home loan you love.  We started off in lesson one by compiling a neat credit and income package in a pdf format.  In lesson two, we talked about how to get some names of pretty good loan originators for you to interview.  In the third lesson, I instructed you about the seven questions to ask in the phone interview.

You should be down to 2-3 people with whom you are comfortable.  You probably have a favorite at this point but you need to see who is going to give you a fair loan.  Notice that I didn't say the cheapest at this point; I said a fair deal.  Shopping for the "cheapest" loan can be counterproductive.  We're going to drop that bunker buster on the select 2-3 originators but we're going to , as Tony Soprano might say,

"Leave a little something on the table so all can eat"

That little something on the table should be about 1%-1.5% of the loan amount.  Originators are paid four ways:

1-  A processing fee (line 810 of the good faith estimate)   
2-  An origination fee (line 801 of the good faith estimate)   
3-  Discount Fees (or points)  (line 802 of the good faith estimate)  and 
4-  Yield Spread Premium (you must click this link to understand)- there is no line item for this; it is disclosed towards the bottom of the page and should read "COMPENSATION TO BROKER (not paid out of loan proceeds)"

Explain that you will be adding up all of the fees and expect that they won't exceed 1.5% of the loan amount but it would be better if it was closer to 1%.  In California, that amount should be around $4,000.

EXCEPTIONS:  100% financing may go as high as 2% as can stated income loans or sub-prime mortgages.  Loan amounts over $417,000 may be closer to 1% of the loan amount and may approach the $10,000 mark for loans over $1,000,000.  There is more work for a loan amount that exceeds $650,000 so the compensation may be higher.  Anything over ten grand should have a darn good explanation.

Now, some smart fella might suggest that he is a mortgage banker or federal bank and is not required to disclose yield spread premium.  That is 100% correct.  This is where you drop the bunker buster and explain that you'll be showing his quote to an independent mortgage broker to discern his pricing.  Be polite but explain that you want to be certain that your are being treated fairly. If he runs for the hills, so be it.

Announce that you'll be e-mailing each originator your credit and income package within the next hour; you'd appreciate a reply e-mail confirming receipt.  Set up an appointment for 48 hours later to spend 15 minutes on the phone with them.  Request that they have the following documents to you (via e-mail) at the end of the next business day:

1- A mortgage loan commitment (or conditional loan approval)
2- A good faith estimate of fees and rate
3- A truth-in-lending statement
4- A two paragraph summary of the reason for the recommendation in the e-mail

You will have blown that originator away !  You have demonstrated your willingness to do a home loan but have asserted your familiarity with the home loan process.  One of them might decline the offer claiming that he is too busy.  No problem, cross them off the list and thank them for their time.

When the "quotes' come in the next evening, you will probably know which one you want.  One of them should be glaringly better than the next and all three should be competitively priced.  If two of the offers come in and you feel comfortable with both originators, deflect to price.  You can always tell your first choice that you liked her offer but it was priced $600 too high (be prepared to back it up with documentation).  That leverage may help you get the home loan you love, funded by the originator you like, at a price you can afford.

Call each originator back and explain why you chose them or didn't choose them.  We appreciate the feedback.  I wish you luck on your home loan search and hope you'll consider me on you short list.  I am not for everyone but for those whom I am the right choice I certainly enjoy doing business with.

Read the whole series: 

• How To Get The Best Home Loan - Neatness Counts When You Want a Home Loan
  How To Find Your Way Through The Home Loan Jungle - Part One
• How To Find Your Way Through The Home Loan Jungle - Part Two
• Loving Your Home Loan

Related Posts