Applying for a pre approval letter..any advice who to use? (PMI, loan officer)

[idreos]

I will soon be looking to purchase a home, and want to obtain a pre approval letter.

Am looking for advice from those who have gone through the process.

Is there a fee? I understand you do not necessarily have to use the same lender to get your mortgage

Any advantage to applying from a bank or online.

Who did you use and would you recommend them

Thanks for your help

[LifeIsGood01]

Originally Posted by idreos

I will soon be looking to purchase a home, and want to obtain a pre approval letter.

Am looking for advice from those who have gone through the process.

Is there a fee? I understand you do not necessarily have to use the same lender to get your mortgage

Any advantage to applying from a bank or online.

Who did you use and would you recommend them

Thanks for your help

No there is no fee. They may have to legally tell you that there will be a charge for the credit report but only if you use them for the mortgage. The advantage of applying with your bank is that they have all your banking records on file. And no you don't have to use the same lender who preapproved you. I prefer to do it in person, but I did it online kind of. It was a broker and I gave her all the info and she submitted it and then sent me the preapproval letter via email. I used a local bank in my area, I won't name them because they are not national anyway and only have branches in 10 states. They ended up selling the loan to Wells Fargo which is fine with me, WF has a great system for paying my mortgage online and seeing all my payment records.

[jaynarie]

If you have a 20% down payment and good credit, shop around for the best rate.
If you are doing a low down payment, you may have more success with a bigger lender, as they often have more options than say a small local credit union would.
A coworker and I are both in the process of purchasing a home. We have the same job function and we hired in two months apart, so we basically earn the same amount. We both are doing low down payments. We have similar credit scores. We both have a low debt to income ratio, with only student loans and a car loan (hers are higher than mine). The difference between our houses is pretty minimal- $30K. We both could have purchased a home twice as expensive as the more expensive one. However, she has an FHA loan and I have a Conventional. She was pretty mad when she found out. I knew I wanted options, so I skipped my credit union. I regretted it for a little while, but now I am happy with my decision.

[LifeIsGood01]

Originally Posted by jaynarie

If you have a 20% down payment and good credit, shop around for the best rate.
If you are doing a low down payment, you may have more success with a bigger lender, as they often have more options than say a small local credit union would.
A coworker and I are both in the process of purchasing a home. We have the same job function and we hired in two months apart, so we basically earn the same amount. We both are doing low down payments. We have similar credit scores. We both have a low debt to income ratio, with only student loans and a car loan (hers are higher than mine). The difference between our houses is pretty minimal- $30K. We both could have purchased a home twice as expensive as the more expensive one. However, she has an FHA loan and I have a Conventional. She was pretty mad when she found out. I knew I wanted options, so I skipped my credit union. I regretted it for a little while, but now I am happy with my decision.

I agree conventional loan is better than an FHA loan. Many large banks are competing with FHA and offering the same 3.5% down but the PMI will go away after a certain point. Now with FHA you have to pay MIP for the life of the loan.

As far as a preapproval letter it doesn't matter if you get it for FHA or conventional as far as being able to see homes, but FHA does require that the home be move in ready while conventional is more flexible.

You can look at any homes and decide which way to finance it later as long as your debt to income ratio is not too high. So if you are buying under your means then you are ahead of the game.

[SmartMoney]

Be careful when shopping by rate alone. It is so easy for someone to use smoke and mirrors when you seek the best rate.

You: "Hi, I plan on buying a home soon and I am trying to get some information to determine who I want to use when I find the home. Can you tell me what you are quoting for a 30 year fixed?"

Lender: "Well, there is more to it, do you know your credit score? And how much do you plan to put down?"

You: "My score is great, for the purposes of this call, let's say 740 and I would like to go with the least amount down."

Lender: "When do you want to close?"

You: "Well, we are just starting, so let's say in 60 days." Or, "our home is being built and should be ready in 5 months, maybe 4 months."

Lender: "Well, our current 30 year is 3.875%!" (And the rest of the world is at 4.125%)

Several things here. The lender did not tell you about any points (upfront interest). Points = higher closing costs. In this conversation it was abundantly clear you are not in position to lock in, so the lender can quote anything they like. You think they are the lowest rate, but when it's time to lock, you are on a clock and less likely to move your pre-approval. You're too busy with your home inspection and HOA docs.

30 year rates change daily, sometimes even more than once a day. When shopping for a 30 year fixed rate, make certain you are in position to lock in on that call. Shop your lenders all on the same day, after rates have been issued in the morning. Ask for an APR, it will uncover high fees. And finally, ask if the lender will rate match. Many do, but not to lenders that are internet based with their profit margins are low (but you need to be all over them and know what you are doing because you are on your own there).

I think the most important thing is to find someone you feel comfortable with and get your pre-approval. Then, when it's time to lock you can check with a couple lenders to make sure your rate is in line with the competition. And if they are not, see if they will price match. There's more to shopping lenders, but this will get you in the right direction. Now, all that said, if a lender has made an exception to the guidelines, you just may not have an opportunity to shop - not everyone will or can make the same exception.

[idreos]

thanks for the informative post...could you clarify

"if a lender has made an exception to the guidelines, you just may not have an opportunity to shop
- not everyone will or can make the same exception."

Thanks for your help!

[SmartMoney]

Certainly, let's say you only have a history of self employment for 1 year. But prior to that, you were a contractor doing the same job at the very same desk and you had no expenses on your most recent tax return showing the self employment income. The loan officer pulls your credit, it's great, and assets are strong. Your boss (who didn't change - only the way you are paid changed) writes a glowing letter about how lucky they are to have you there. Many lenders may not be able to touch that loan. Most loan programs would prohibit this scenario. But one portfolio lender takes the scenario to management and gets the greenlight to proceed.

Another example: you have an unpermitted basement rental unit. Most lenders won't do that, despite that is the only problem. Great ratios, great assets, strong work history and equity. A lender gives you an exception.

In both of these cases, most lenders would pass on these scenarios, they don't adhere to Fannie, FHA, or VA guidelines. But there are portfolio lenders that make these exceptions every day. Try to play one lender over the other over rates? Won't work if they won't do the loan.

[mortgageboss]

Find a local lender whenever possible.