October 2019

Forget Shopping Around: Answer these questions to find the right mortgage

Author: Fran Mckinney

There’s a lot at stake when you buy a house. Your home is the biggest purchase you’ll ever make. It’s the biggest single piece of your financial picture. It’s a decision you’ll have to live with for years—maybe decades—and it’s incredibly difficult to untangle if you don’t get it right. This is a decision you don’t want to take lightly.

We all know that. So, what do you do about it? When the time comes to buy a new house or a second home or to refinance the one you have, it’s worth taking the time to get it right. That could mean shopping around for a mortgage, but it also means thinking long and hard about what you actually need before you start making a bunch of appointments.

If you spend enough time planning on the front end, you might be able to decide who to work with without the whole hassle of talking to every lender in the area—unless you just like leaving work to meet with mortgage people who smile and shake hands and try to sell you the moon. Your choice. To make it simple, answer these questions first:

Which lender should I choose?
This is the big one and really the only one that matters. If you get this right, the rest of your questions will start to fall in line after your first phone call. Start with what’s most important. Surprising to most, it’s not the interest rate. It’s not the closing costs. It’s not even the amount you can get approved for. It’s the relationship. Without a strong relationship with your lender, nothing else will happen the way you want it to. How can someone who doesn’t know you and your finances possibly know how much to lend you? How can you trust that you’re getting the best rate? How can you be sure the closing costs and fees are fair?

Here’s rule of thumb No. 1: If your mortgage advisor isn’t willing to share his or her cell phone number, there’s a problem. It’s our job to be here when you have questions or concerns, no matter when they pop into your head. Weekends? No problem. At night? That’s when most people finally have time to fill out paperwork anyway. You’re supposed to have the kind of relationship with your mortgage advisor that allows for contact at any time. Bankers’ hours shouldn’t matter. That’s table stakes.

Okay, so where do I find that relationship?
Start by looking at who you already do business with: your bank. They already know you, know your finances and know your history. They’re automatically in the best position to know what you need. But before you put down this article and say, “case closed,” think about who you bank with right now. Is it someone you trust? Is it someone local? Is it someone you know by name?

Rule of thumb No. 2: If you don’t know your banker by name, you have a problem. And if you don’t know who’s really calling the shots, go somewhere else. Because when it comes to home loans, it definitely pays to shop locally.

The big national banks certainly have the resources to lend you money. And you may even bank with one of them today. But who’s really calling the shots there? Is it someone who sits at a desk in the Lowcountry every day? Or is it someone in Atlanta? Charlotte? New York?

Local bankers aren’t trying to be Bank of America. We’re easier to get ahold of. We know the market better than anyone else. We can help in all the small ways that make your life easier, like meeting after hours when it’s most convenient to you or by having a relationship with your real estate agent that makes the whole process smoother. I’ve even driven by construction sites to check on deliveries or take photos of progress for clients who can’t get away from work. Do you think an online mortgage company will do that?

So, I ask again: “Who are you doing business with now? Are you happy with them?” If so, that’s great. Go forth and talk with them about a new home loan.

If you hesitate for even a second, or if you can’t quite think of your banker’s name without glancing at their name tag, consider pulling up stakes and moving your money somewhere else. Find a bank where you can get a fresh outlook on your finances and start talking about how a home loan fits into the complete picture.

What kind of mortgage should I look at?
This is trickier than it seems. You might think you only have a couple of options, and if you go for one of those online lenders that advertise all over TV, you’d be right. They’ll happily sell you a cookie-cutter mortgage, maybe even with a reasonable rate, that’s easy to apply for. But just because it’s easy doesn’t mean it’s the one you need. You have your choice of several types of home loans:

Traditional mortgage. It’s straightforward and easy. The rate is probably competitive. Closing costs are clear. It might be exactly what you need! Or it might not be. Don’t settle for easy just because you can fill out the application between episodes on Netflix.

Fixed-rate or adjustable. Traditional mortgages come in a couple of flavors. Fixed-rate gives you consistent, predictable payments for the life of the loan. Adjustable rate mortgages (ARMs) are fixed for the first seven to 10 years and then change annually after that. So, you pay less at first, and then the payments may go up.

Construction loans. We see a lot of these in our area, especially with vacation homes. This is a great loan to get locally because your mortgage advisor will have a relationship with the builder and will be involved every step of the way, which helps with draws and keeping up with the status of the project.

Low-to-moderate-income loans. These are more rare, frankly because most of the homes here don’t qualify. Some people may qualify for specialty loans that require no down payment or private mortgage insurance (PMI) that come with an affordable interest rate. And some homes may qualify just for being in certain neighborhoods. For those, it doesn’t matter how much money you have or make. Just buying a home in a “distressed” community qualifies you for help. But, as always, these often come with strings attached.

Veterans Administration. We all want to honor those who serve our country in the military, and there’s even help available for home buying. Active duty service members, veterans and spouses of veterans are eligible to apply for VA loans that come with no down payment and give the option of having the seller pay closing costs.

Fran McKinney is a mortgage advisor at Pinnacle Financial Partners on Hilton Head Island. She can be reached by phone at (843) 686-1548 and by email at Fran.McKinney@pnfp.com.

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