Applying for a home loan.

June 19, 2006 9:12 AM

I am just starting the process of applying for a home loan. I've attended a first-time home buyer seminar in my city, read tons of books and have done my homework regarding mortgage options, home buying process, etc. I have an excellent credit score, and one debt (car payment), and make a decent salary. I've been advised to deal with a direct lender as I could get better rates, and fewer fees with them than through a mortgage broker. My problem is, I get virtually no response from the lenders. They take my information to start the pre-qual/pre-approval process, then nothing. They don't call back, and don't return my calls. This has happened 4 times in the last month. Has anyone else experience this? I live in Southern California (LA/Southbay area); do lenders here not need the business? I have never seen this issue addressed in home buying books or websites. Any insight, advice or recommenations?
posted by socrateaser to home & garden (10 comments total)

Have you thought of making an appointment to speak with the mortgage officer of your bank? You are already their customer and they have a vested interest in working with you.
posted by onhazier at 9:24 AM on June 19, 2006

I really recommend working with a mortgage broker. It is slightly more expensive but if you get a good broker, he or she will act as your advocate and really guide you though the process. Ask your friends in the area who they have used-- and get independent references as well.
posted by miss tea at 9:28 AM on June 19, 2006

I agree. I'm on my second house now and the first time we went through a mortgage broker who was very responsive and did a good job but I wasn't terribly happy with the contact options I had with the actual mortgage company once the deal was done. The second time we forgot about any online application or phone stuff and went straight to the bank and got absolutely wonderful service from the person there. Going in totally cold, the whole thing was done in about an hour. She didn't even find it necessary to formally pre-approve to any particular amount, she just said, "OK call me up when you find the place you want and I'll make sure our institution will be OK with it before we move ahead with the deal."
posted by mikel at 9:31 AM on June 19, 2006

I tried one of the online mortgage companies and had the same experience. I finally just went to my local bank. During conversation with the banker I mentioned what happened when I tried to use the online provider. Her explanation was that they cherry pick the most profitable loans, those at higher dollar amounts, and ignore the rest. She seemed credible and my loan was for less than $100K. As it ended up the local bank gave me a better rate and I don't think the fees were much, if any, more.
posted by Carbolic at 9:48 AM on June 19, 2006

i had a dreadful experience with a mortgage broker: she was nonresponsive, gave vague answers to my questions and didn't seem able to explain the process at all. when i realized i couldn't explain the mortgage i was going to get through her, i knew i couldn't possibly agree to it.

i called my credit union; they not only got me a better rate, they waived a number of fees and painstakingly explained everything about the loan to me. therefore, i agree with the suggestion of walking into your bank or your credit union and doing this in person.

if you suspect your bank's rate is not the best you can get, walk into the bank next door. then you can go back to your bank and try to negotiate, if you really want to.

do be careful, however, your credit score is, in part, determined by how many recent credit inquiries you've had. excessively shopping your loan can backfire.
posted by crush-onastick at 9:57 AM on June 19, 2006

We recently went through this, from our experience there were two options. Go direct to the banks, do a lot of legwork, get decent rates at the expense of navigating the process yourself.

We opted with the second route, we actually got two referrals from friends and family and our real estate agent on mortgage brokers, I interviewed them and selected two of them and let them know I would be working with 2 mortgage brokers until I settled on a loan, we would then select the broker that best met our needs and offered the best rates available.

I was able to keep the mortgage brokers working for me to secure the best rates available. It wasn't too much headache after I assembled all the financing documentation and just made 2 copies of everything, one for each. I found that this worked well, I was able to leverage them against each other in addition to having my loan options searched out and vetted against a larger pool of potential lenders.

Re: Credit Score. A good mortgage broker will run your credit once and then be able to tell from their history with working with their clients and their lenders what is likely to be acceptable by a particular lender. This will cut down dramatically on folks peeking in to your credit history and potentially raising a flag, but as it will be like institutions checking your credit I think it's unlikely that this will impact your FICO regardless.

The banks care about 4 things:
1) Debt to Equity Ratio
2) Past credit and payment history
3) Where the cash is coming from (for your typical 80-10-10 scenario)
4) Monthly gross income and salary history

We close tomorrow on our first and I have to tell you it's been a horrifying and (on reflection) not that bad of a process. I learned a LOT and we ended up with the house we wanted.

Good luck!
posted by iamabot at 10:26 AM on June 19, 2006

Oh, there is a distinction between buying your first home and buying your second and subsequent homes, generally the first home seems to be more of a challenge on the documentation front, whereas with your second+ the banks seem to view you as less of a credit risks and don't require you to jump through as many flaming hoops.

My personal rule of thumb is that if a bank or any other professional cannot be bothered to give you direct honest answers in a timely manner then they aren't the right person to be working with. We are first time buyers and I was very upfront with the mortgage brokers and agents we worked with that I would have a lot of off the wall questions because I wanted to fully understand the process and that if they were uncomfortable with this then we should be upfront about it and not waste either persons time.

Find someone who will at least talk to you and walk you through the process, understanding it via a professional who does this as their job really makes it less intimidating.

Don't let unresponsive people throw you, expect and demand service, you're buying a house and PAYING for these folks (including the banks if you go direct) for their service in addition to the money.
posted by iamabot at 10:34 AM on June 19, 2006

I want to highly recomment this website The Mortgage Professor. It is run by a former Wharton Finance professor. He tells you everything you need to know about the process of getting a mortgage. One of his major recommendations is to use an Upfront Mortgage Broker. This person charges you a flat fee and works in your best interest. He provides links to them. He also reviews the online mortgage sites.
posted by bove at 11:06 AM on June 19, 2006

In my personal experience, you are missing a step.

First, find a Really Good Realtor. Someone who listens to you and understands what you want. They will do two things. The obvious thing is they will help you find a house in your desired area and price range. An experienced realtor will also point out things that a first time house-buyer might not notice, like "those windows are going to need replacing next year" or "did you see the shingles? I bet the roof leaks."

The second thing the realtor will do is have the name and number of a Really Good Mortgage Broker. This is a person that your realtor has worked with before, so he/she answers the phone when your realtor calls! Furthermore, this tag-team of professionals knows exactly what paperwork you need, what you can reasonably qualify for and how to fill out all the blanks to maximize your deal. The mortgage broker may or may not work with several mortgage companies, and thus might be able to get you that "four offers by this time tomorrow!" kind of service that certain online folks advertise.

This combination is important because neither one of them makes any money until you close on your house. This is probably why things were going slowly with your inquiries; nobody saw a clear payday and so they thought you were just window-shopping.

FWIW, a couple years back a mortgage broker was able to get me a better deal with my mortgage company than the company was willing to quote me over the phone.
posted by ilsa at 3:10 PM on June 19, 2006

One other question that's on my list to ask every lender is: do they sell the loan, and if so, do they still service the loan?

Most places (in my experience) won't commit to not selling the loan, but the decent places will commit to servicing the loan. This means that the bank you're familiar with will always be the place you send payments to and get statements from, etc.

I once got a loan through a broker; the initial bank sold the loan after one month to a place that, as far as I could tell, existed only as a series of sequentially numbered post office boxes in New Jersey. I heard from them once a year, when I got a book of coupons and my tax statement every January.

I'll also second the recommendation get a good realtor; I've also gotten discounts at banks my realtor recommended ("preferred partner" or something like that) that were definately worthwhile. Even with the discount, though, that bank was still beaten out by other banks for some types of loans (adjustable rates, up to about 5 years). That leads into another point...

During that same transaction, my wife happened to mention to the teller at our bank that we were pursuing a mortage with Other Bank, and they just went nuts. This bank's mortgage division was hot to beat out Other Bank, and would drop fees and cut deals left and right to beat them. Sadly for them, it wasn't enough to beat out the "preferred partner" discounts. So, shop around.

I've also had a mortage through a credit union. Overall, they didn't (and don't, I moved away from them for my most recent mortgage) have competitive rates, and I couldn't get any of the bonuses I could from the traditional banks. They did have excellent customer service, and were very easy to deal with, but sometimes cheaper is better.

Lastly, as the time of closing draws nigh, ride herd on the escrow company. Some of them are total dingbats and not worth any of the fees they charge. When you're signing the papers, read everything. Every Single Word. Even if they whine that they've only scheduled you 20 minutes to sign an inch thick stack of papers, Read Them All. You're signing legally binding stuff, make sure you understand it.

On the purchase and sale agreement, you'll also see a box that requests the escrow company to handle the changeover of utilities. Some of them charge moderately ridiculous amounts of money for this (50, 100 dollars) to call up a couple of companies and get payoff amounts to put into the paperwork. I'm kind of a control freak and I usually do this myself, but check on the fee if you think this is a handy service. It might save you some cash and headaches if, e.g., a seller bails without paying the trash bill for the last year and the city tries to stick you with it using the famous phrase "the bills follow the property." Big ticket stuff, like property taxes, is (or should be) handled correctly no matter what; this is just for the utilities.
posted by doorsnake at 4:28 PM on June 19, 2006