Preparing for the Mortgage Process

Comparison Shop To Get The Best Mortgage Rate

What is the best way to make sure you get the best mortgage rate? Compare several different offers. If you just spent 40 minutes talking to someone about your scenario, learning about their company and their process, and getting a detailed quote for what they can offer it might be overwhelming to think of repeating that process with several other originators. Start by checking out the advertised rates of a few other banks and lenders in the rate tables on a site such as ForTheBestRate.com. (There are others out there, but of course as the owners of ForTheBestRate.com we'd love it if you started your search there! We also think it offers a great representation of what the mortgage marketplace has to offer on a given day.)

When looking at advertised rates if you see companies with rates significantly higher than your existing offer you probably don't need to contact them. If you find lower advertised rates it might make sense to give those banks and lenders a call to have them quote your scenario. Be sure to look at the advertised rates for the same program you had quoted, and check the assumptions made when listing the rates. It would be near impossible to list a rate for every scenario out that could come up so rates are displayed for the most common situation. This generally means things like a 20% down payment or equity in the property, owner occupied, for borrowers with good credit. If your loan falls outside of these guidelines mention that up front when requesting pricing as what you saw advertised may not apply.

Request a Good Faith Estimate (GFE) from the three or four people who quoted you the best pricing. Always consider up front fees and not just the rate when comparing offers. Try to get the GFEs within a few hours of each other and ask if pricing has changed recently. That will help you compare apples to apples, as mortgage rates can change several times within one day.

Before making your final decision take into account how you feel about the mortgage professional you will be working with. You should have confidence not just in their price, but also that they will work hard for you, communicate thoroughly, and get the loan closed in time. Remember that you are not guaranteed the rate you were quoted until you have it "locked in". Always ask for the lock confirmation in writing so there is no confusion.

The Debate Is On Over Whether To Eliminate The Mortgage Interest Income Tax Deduction

Lawmakers, industry groups, and taxpayers are hotly debating whether it is time to eliminate the mortgage interest income tax deduction. The deduction is very popular among home owners, but this post from the Wall Street Journal Blog: Developments takes a thoughtful look at both sides of the discussion.

Read the full story here: http://blogs.wsj.com/developments/2010/11/12/is-it-time-to-roll-back-the-mortgage-interest-deduction/

Nick Timiraos, the post's writer, points out that one proposal is to not eliminate the deduction entirely but to lower the maximum amount of the debt you can deduct interest on from $1 million to $500,000. It would also eliminate the deduction for home equity loans and lines and for second homes. While that's not going to be appealing to someone with a $1 million vacation property it could be comforting to someone with a $200,000 loan on their primary residence. Of course this is just one proposal - there will be lots of political manuvering before anything actually happens.

The post also discusses the objections of the National Association of Realtors, National Association of Home Builders, and others in the industry. They are extremely concerned about the effect eliminating this popular tax deduction would have on an already weakened housing market.

Online Tools To Help You Save For a Downpayment

A few years ago it was common for lenders to offer 100% financing for many scenarios. Today it is extremely tough to buy a home without coming up with a down payment. (Those who qualify for a VA loan or USDA loan may still be able to borrow 100% of a property's value through those programs.) The best pricing is generally available to those who can put 20% down, but FHA loans offer competitive rates with as little as 3.5% down.

Whatever amount you hope to put down, it can be tough to save the money. Few aspiring home buyers have a lot left over every month to put into the "new home fund". Check out some of these online tools that may help you reach your goals sooner.

Budgeting Tools -
Mint.com is a very popular site that directly (and securely) accesses your financial accounts giving you a picture of your spending and savings in one location. You can also set budgets for different categories and be alerted when you go over your alloted budget. I actually use this service myself and find it incredibly easy and helpful. I set up the account and then left it alone for a couple of months. This let me see what our typical spending was and set up budgets to try to trim down some of the categories. Set up a goal within Mint to save for your downpayment and watch your savings grow month after month.

Other sites similar to Mint you might want to check out include Wesabe and PearBudget.

Automatic Savings Programs or Savings Incentives From Banks -
Many banks offer programs that help you increase your savings. A few include:


Keep The Change® from Bank of America - Debit card purchases are rounded up with the "change" being deposited in your savings account. BofA will even match a portion of the savings. Learn more: http://www.bankofamerica.com/promos/jump/ktc_coinjar/index.cfm?&statecheck=DC

Savings Today And Rewards Tomorrow™ from U.S. Bank - They reward savings (through recurring transfers) with a $50 visa card when you save $1000, and another after keeping a balance of $1000 or more for a year. Learn more: http://www.usbank.com/en/personal/products_and_services/savings/start.cfm?redirect=start

Check local banks and credit unions to see if they have similar offers. Most institutions will also allow you to set up automatic transfers from your checking to savings account, eliminating any effort and the risk of forgetting.

Savings Support -
I considered including some of the "deal" sites that allow you to save a large % at a certain website or find a 2 for 1 offer, but the problem is that these sites are still encouraging you to spend money, not save it. It doesn't matter how great the deal is - if you don't need the item you'll save more by not buying it at all. Instead check out these financial experts who will encourage you to cut your spending and increase your savings - they want you to be financially secure.

Clark Howard - www.clarkhoward.com

Suze Orman - www.suzeorman.com

The programs listed above were described according to the institutions' websites at the time of this writing. The banks may make changes to these programs in the future.

Best of luck saving for your new home!

Mortgage Rates On The Rise - As of 12/3/2010

Freddie Mac reported in their Weekly Mortgage Survey that rates have inched upwards for the third week in a row. They show 30 year fixed rate mortgages at an average rate of 4.46% with .8% in fees and points. This is up from 4.17% with .8% in fees and points, the lowest point in 2010, three weeks earlier.

Mortgage rates remain historically low, but according to the Mortgage Bankers Association the increase has resulted in a drop in new mortgage applications.

We saw a rise in mortgage rates for other programs as well, with 15 year fixed mortgages at an average of 3.81% with .7% in fees and points, and 5 year adjustable rate mortgages averaging 3.49% with .6% in fees and points.

There is a positive aspect to the rising mortgage rates - according to Frank Nothaft, vice president and chief economist with Freddie Mac, "Mortgage rates followed bond yields higher this week as recently released economic data suggest the economy may be stronger this quarter than the previous."