Jeez, with serious talk of buying suddenly afoot, I'm realizing how little I know about the process.
- What's the best way to shop for a mortgage, and how do you tell which is best for you?
- Do you get preapproved only after you choose a lender? Is there any obligation to preapproval?
- How hard is it to shop around and make offers without a real estate agent?
- My credit score is high, but are all the opened/closed credit cards going to raise red flags and/or eyebrows when lenders check my credit history?
I'm remembering the first and only time I shopped for a home. Went into it blind, with money borrowed from my dad and my real estate agent basically just telling me what to do. A few times, unexpected expenses cropped up, like earnest money and closing costs. Also didn't know about property tax escrow beforehand. I didn't choose my lender; my real estate agent just shuttled me to someone who got me my mortgage and my home equity loan (which I took out immediately upon buying, with the intention of paying my dad off, even though I didn't finish paying him off until years later).
I did an online prequalify with my main bank today, just to see what that said. But it was instantaneous so I doubt it took into account my credit history. And it didn't ask how much cash I have for a down payment, which I assume would affect how much I could borrow.
At least this time I know a few things, and I know of the existence of things even if I don't know much about them. But it's clear I need to educate myself a lot more, fast!
Sorry for the scattered entry; basically just thinking aloud. Now you know how scattered and messy it is inside my brain. 
Need a crash course in home buying!
April 22nd, 2014 at 11:04 pm
April 22nd, 2014 at 11:47 pm 1398210427
When we bought, I didn't want our loan to be sold. I'd heard too many people's tales of woe of loans being bought and bought again, and the transfer of the loans leading to all sorts of problems. I also wanted to be able to make additional payments to the loan without any sort of restriction or penalty. We borrowed from a local credit union. We had very low loan costs, our loan was never sold, and we paid it off in 15ish years instead of 30.
We were prequalified? approved? for about twice what I felt comfortable borrowing. This was the mid-90's; I don't know what lending establishments are doing now after the 2008 meltdown.
April 22nd, 2014 at 11:55 pm 1398210902
April 23rd, 2014 at 12:08 am 1398211728
For first home purchase, I remember parents really advising us on terms of loan to watch out for. But, they bought in different times. Going with our credit and fixed rate mortgages, I've never come across anything unusual. Of course, we always stayed away from any crazy loan products, and a lot of that is because we have always put 20%+ down. You will probably have to be more careful if you put less down.
Why skip the real estate agent? I could not imagine doing so. I suppose gives you a little more negotiation room on price? We have always had an excellent real estate agent, who saved us a fortune and gave us wise counsel. I could not imagine skipping that help. (Seriously, our first home ended up being far more than we ever thought we could find in our price range. We give her much credit. We know she literally saved us a fortune).
I've never had a lender give a flip about all our closed credit cards. I refinanced once when we had maxed out 3 credit cards with 0% interest offers. I was a little nervous about that, since it was the first time we had ever applied for a mortgage loan with "debt". But, we also had a bazillion dollars of equity, so they could really care less. (All the borrowed money was in cash; FDIC-insured CDs).
April 23rd, 2014 at 12:20 am 1398212432
In my experience the most important factors were interest rate and fees. Loyalty isn't part of the process but we've a different system and use the services of a mortgage broker only if there is special circumstances.
I suggest checking the charts on line. The CUs do their version of profit sharing, which gives some percentage of profit back to their borrowers over the long term. You don't necessarily need a brick & mortar financial institution [I think Dr. Disney Steve has a Quicken mortg. I think there will likely be another round of bank consolidation so what you get in 2014 is not necessarily the same in 2029 or 2044. You need to understand the small print, particularly that you can make payment directly to principal without restriction.
We learned that everything is negotiable. We kept asking for fees to be waived, fees reduced etc. At the end we paid our lawyer to review the details to make sure it was all ok. We've been moved and seconded [loaned] by out employers to different cities and even to USA so we've bought and sold 6 or 7 houses over the years.
April 23rd, 2014 at 12:59 am 1398214767
A full approval requires the lender to pull credit. Some lenders will charge for the credit report. Doing this several times in a short period of time when the purpose is obtaining a mortgage does not lower your score significantly. With any luck, you will only have to get approval from one or possibly two lenders.
It's virtually impossible to shop without an agent. Almost all homes are sold through the MLS, which is owned and operated by the local Real Estate Board. Even if you call on a sign, you will talk to the listing agent. That agent will have a duty to represent the seller, not you. In all likelihood they collect the same total commission from the seller whether or not they have to split it with another agent, so there is no benefit to you. Since you don't buy and sell homes frequently, competent representation should be helpful to you. These days, a good buyer's agent will save you time and money and will negotiate on your behalf. Get a few referrals and talk to them.
For credit evaluation, the lenders look at whoever is going to be on the mortgage. They will go with the lowest scoring person in deciding whether to loan and at what terms. These days, almost all loans are bought by Fannie Mae or Freddie Mac, and they have a table of what factors require adjustment to the basic rate.
With regard to closed cards, they should not matter. Lenders look at the credit score and the debt to income ratio. They have to look more carefully at debt to income than they used to because there are more rules about proving capacity of the borrower to repay the loan.
How much you can borrow is not really related to how much you put down. If you qualify for $400k, you can buy a $500k house with 20 percent down or a $445k house with approximately 10 percent down. The type of loan you can get and the terms are dictated by the percent of the purchase price you put down.
April 23rd, 2014 at 01:05 am 1398215154
(& stay away from *bad* real estate agents. They will cost you a small fortune. That is the flip side of my "good realtor" advice).
April 23rd, 2014 at 06:38 am 1398235095
I would use an agent. A good agent will find you places that have not hit the open market and will save you money and time. As a buyer you don't pay your agent anything. AND since you are selling you could negotiate a lower commission % rate because your agent will also make money when you buy the new place with him/her.
I think a high FICO will be just fine. I don't think anyone is going to look much past that.
I am excited for your family!
Good luck!
April 23rd, 2014 at 02:46 pm 1398264364
I think the most difficult part was coming up with all the documentation that was required, but you are so organized I don't think that will be a problem for you!
April 23rd, 2014 at 06:37 pm 1398278274
In California public employees (fire, police, teachers, state and county employees) can participate in the CalPath program which has very low interest rates (FICO score above 750 I was quoted 3.875 yesterday for 300k-much more than I want to borrow), lower fees, etc. Might want to check that possibility out.
April 24th, 2014 at 01:58 am 1398304728