At my age, I am somewhere between a leftover Gen X’r and a not quite ready to be a real adult yet Millennial. My Middle-Aged Debt Starter Pack includes Mortgage, Car Payment, Credit Cards, & Student Loans but I pay my bills on time and make contributions to my 401k like a good American should. Before becoming a Loan Officer, I used to live Ron Livingston’s character in Office Space for well over a decade as some form of low-level manager or worker bee in the mortgage world. I learned a few secrets along the way, which I am going to share for all eleven of you reading this.
The answers to the questions you never thought were important await you. Did you know the average age of a loan officer is 54? 54!!! Google It. At 39, I am practically a spring chicken by comparison.
Put away your shapes and colors; it is time to talk numbers. If you were born before 2000, there’s a 60-70% chance you already own your home or someday will. In 2018 the percentage is somewhere around 64% of homeownership. Buying a home doesn’t have to be rocket science, but you can outthink the room and set yourself up for a world of frustration if you are not prepared.
Here are 8 things you need to know when selecting a mortgage:
1. Choose the Right Loan Officer. I know you kids like to do everything online these days, but do you really want to get your mortgage from the Wally World of mortgages to save a few bucks? This is by far the best advice I can give you. Work with someone in person that is 100% commission; they will work harder than anyone to earn your business because they are dependent on you if they are to pay their own mortgage. While online lenders look like they might be cheaper and sometimes they are, you’re dealing with someone working at a call center barely making more than your local pizza delivery guy. Their incentive to work hard for you is not very big, about the same in relation to the tip you gave for that pie…a few bucks. Your cubicle Steve isn’t going to answer on the weekends or after hours when you have questions but, your commission only loan officer most likely will.
2. Beware of Clickbait. The algorithms know you are shopping for a home loan. Low Rates, lock in now! Missile Mortgage download our app and get a mortgage in a minute! You are buying a house here kids, not ordering beard oil on Amazon.
3. Don’t Let Your Broker Gamble on Your Rate. Lock your rate in at application or as soon as you can. In today’s market, the rates are volatile, but their trend is upward so don’t gamble. Nearly every company out there has a “float-down” option which means if rates improve significantly (by .25% in rate or more) they can float you down to a lower rate.
4. Loyalty Can Be A Bonus. If you are loyal to your mortgage broker, chances are you are going to get a better deal on your second go around. Don’t feel like you are being a jerk when asking for a little bit more than you did last time. You might get your appraisal for free, or maybe some fees knocked off for being a returning client. Besides, you know what to expect from this Broker.
5. Don’t Pay Points! If you plan on making every mortgage payment for the next 30 years or even 10 years for that matter, then skip this question. Paying points buys down the rate to a lower payment. The breakeven is typically 6-10 years before you start saving money. Online lenders LOVE to encourage you to buy points, and they even advertise it in their unbelievably low rates. Be careful here. While you might be saving $26/mo in payment, the $3000.00 you just paid for that rate means it is going to take 9 ½ years before you save any money. Pay the higher monthly and keep the extra money in your bank account. There is one caveat, if the seller is pitching in for closing costs then buy down that rate baby!
6. Mortgage Insurance for Dummies. If you put less than 20% down on the purchase of your next home you are going to have mortgage insurance and the amount of that mortgage insurance will depend on how much you put down, credit rating, property type, and number of borrowers on the loan application. It never goes away with FHA or USDA, but on Conventional mortgages, it will cease to exist after you reach 78% of the original principal balance…so like 10 years. Refinance after a few years if you find yourself in an equitable position to do so.
7. Not All Mortgages Are Created Equal. Things I hear all the time: Why are you asking me for this? My last mortgage didn’t need this. I make plenty of money and have good credit so why is this so difficult? Thank the banks of your mother and father for basically making the financial world one big giant regulatory mess. The truth is, the more complicated your income or credit situation, the more documentation will be needed. Essentially the bank is trying to prove that you will make your payment and you are not laundering money or sponsoring terrorism. The lending world is constantly evolving, so chances are each experience will be different.
8. Know Your Rights. All those boiler plate disclosures you sign are for your protection. If you feel like you have been discriminated against in any way, shape, or form, then it is time to speak up.
Millennials by in large are better with their money because they saw their parents and their friend’s parents lose almost everything they owned during the recession years. Now we are left with a generation of tightwads that are rate conscious and educated. Lucky me.
Randy Vance has 19+ years in mortgage lending experience, i.e. originating, processing, underwriting, etc. Insert plaques and prestigious accomplishments ______ <—- HERE.