Mortgage Shopping 101

September 23, 2009 8:27 AM

What strategies would you recommend in selecting a lender and negotiating lending fees for a first-time home purchase? (Purchase is in rural Oregon).

My wife and I are looking at homes in the $100,000 to $140,000 range, which is fortunate as the real estate market has tanked in the area where we're looking (Douglas County, Oregon.) We've made an offer on a house, and it qualifies for a USDA rural development loan. The big thing I'm trying to do now is decide whether to go with one of my Lending Tree offers or go with a local lender.

I've received good faith estimates from local lender, a trustworthy and friendly guy who goes to my church. I have also received good faith estimates from a Portland bank which responded to my Lending Tree request. I am not terribly concerned about appraisal pricing, or home inspection or title fees or other third-party costs they can't control. But I would like to know what's customary for a mortgage and what I can get waived. Right now, the local lender's price is coming in at $1,400 more than the Portland bank.

Here's what I think are the variables: Origination fee. Processing fee. Wire transfer fee. Underwriting fee. Credit report. Settlement/closing fee. Appraisal review fee.

Am I missing anything? What tips would you recommend in shopping for this mortgage? Am I taking a big risk by going with the Portland lender instead of the local guy? Both loan rates are at 5.25 %.

posted by Happydaz to home & garden (5 comments total)

Ask the local guy if he can match, or get closer to, the big bank's deal.

Ask both to itemize the fees.
posted by notyou at 9:03 AM on September 23

I'm sorry you're not getting better answers, but...yeah, you just have to put all the GFEs side by side and go through each itemized charge to compare them (they should even have ID #s like "1004"), identify those that vary (your list above is good, there may be others but you can ask the bank), then see if there's any negotiating on any of them (I have found there is not, but your local guy might be more inclined to work with you).

You can also go to random bank's websites and use their mortgage calculators, too, to do up estimates for yourself so you can also see THEIR itemized charges, to compare to the ones you already have.

Or have them do an actual GFE, it shouldn't cost you anything (just don't let them run a credit check at this point, tell them you only want an estimate, you're not actually applying for a loan).

Good luck!
posted by tristeza at 11:21 AM on September 23

Also - consider going to a mortgage broker and letting them do this work for you.

I just went to one yesterday for the first time (for a re-fi, because I'm totally sick of doing exactly what I just described), and I think it's going to be a huge relief to have someone else working on this for me to get me the best deal.
posted by tristeza at 11:23 AM on September 23

OK, just to follow up tristeza here, when we bought our first home, this home, I went with two mortgage brokers and Sallie Mae. The real estate agent suggested broker #1, a colleague suggested broker #2, and Sallie Mae kept spamming me about affordable rates for student loan repayers, so I figured ok, you can play, too.

Each provided detailed estimates, including the various fees, points, rates. Then I kept shuffling them around until there was only one guy standing. Sallie Mae dropped out first. Broker #1 ended up offering the best deal.
posted by notyou at 11:33 AM on September 23

We got the best advice on lenders from our real estate agent when we were househunting. Neither our credit union nor the online lenders could compete with the agency she recommended us to.
posted by iceprincess324 at 11:57 AM on September 23