Interest Rate is Only One Piece of the Puzzle
The vast majority of people think about interest rate first & foremost when contemplating financing a home, business or building. There are other factors to consider & decide upon that carry similar weight to the interest rate. This short article discusses a couple of them. For a more in depth look, contact your trusted mortgage finance professional.
In Real Estate Transactions, Examine More Than Just Your Interest Rat
POST WRITTEN BY: Michael Kenyon
Money means many different things to different people. I talk to clients from all walks of life, and for some of them, a few dollars is the difference between keeping the lights on or not. Others could use hundred-dollar bills as napkins. Home ownership is a dream for many of us, and needing to borrow money to own your home makes you part of the majority. Paying cash for a home is the exception, not the rule.
For that reason, a lot of people shop their interest rate when they are in the process of buying their home. But just like shopping for the best interest rate for the perfect home, did you know you can shop other services as well? Between home inspectors, title companies, homeowner's insurance and so on, it is your right to be an informed consumer. And furthermore, it's your responsibility to yourself and your family to do your due diligence to make sure you've negotiated the best deal across the board. The Consumer Finance Protection Bureau allows for this. Ask any lending professional — this is why we have the new Loan Estimate (LE) and Closing Disclosure (CD) procedures from the CFPB.
It may seem contrary to the above, but at a certain point in time shopping can become detrimental. If you shop for too long or with too many service providers, you may end up overwhelmed with information and unable to make a decision. Even worse, you can put your home purchase at risk.
First things first: Remember you're on a timeline. Real estate contracts have many different contingencies that must be met. If you don't shop early enough, you can lose valuable days that could put these contingencies in jeopardy. If you go past them, your contract could default. If you were in a multiple bid scenario when you ratified your contract, the seller may then exercise their option to cancel the contract and go with another buyer. It's not likely, but it can happen.
There are a few things you can and should shop ahead of time, before you start actively looking for your home and viewing properties. Start with the following:
Real estate agent: It's more common now than in years past, but real estate agents can be shopped. Listen carefully to what they tell you, do your due diligence and go with who you trust. Talk to your friends and family; if they referred someone to you and you trust their opinion, that means something. Online reviews and comments are great, but remember that you're the decision maker. Among other things, you want your agent to work for you, be knowledgeable and trustworthy, and make you a priority.
Mortgage lender: While rates change daily, we are in a lending climate now where if you're going to shop interest rates from lender to lender, you need to do that ahead of time. A lender should be doing a full review of you as a borrower so that when you go out searching for your home, you are fully vetted. They can't fully review the property and title work yet because you haven't found a home, but they should know quite a bit about you, and there should not be many (if any) surprises related to your position during the loan process. An 800 credit score, a 20% down payment and low debt-to-income ratio are great to have, but compliance, underwriting and federal, state, and local requirements are so extensive these days that even the most well-qualified borrower is no longer an open-and-shut case. Just like with your agent, listen to the lender, look at the numbers, get feedback from those you trust and make the decision that is best for you.
Title company: Few people know they can shop their title company, but you can. Most agents will bring up a title company/settlement attorney when you're submitting your offer to the seller. This should actually be discussed at your first meeting with your agent. That way, you have time to compare one to another and review fees without feeling the pressure of sales contract deadlines.
Home inspector: This is where you want to get feedback from your real estate agent, once you've decided on one. Generally, an agent will already have their home inspector lined up, which is good. They've been in the industry for a while, and they have experience and have vetted who's good, responsive and hopefully not too expensive. If the cost seems high, though, ask questions and shop.
In the end, everything can be negotiated. You may get a hard no on certain things along the way, but it never hurts to ask questions and explore your options.