Mortgage News

You’ve been pre-qualified. You’ve bought a house or you’ve got a contract on a house, and you need someone who is going to guide you through that. I’m that person. As a mortgage advisor, I try to take the position that I’m going to be with you for the next month and guide you through the entire process. First, you’ll go to an attorney review and you’ll want to get a home inspection. From there, you’ll want to get all your paperwork and documents in order for the mortgage advisor. Remember, ideally you will have met with this advisor one year prior buying a home, but once you’ve met for the attorney review you will definitely want to bring together all the paperwork. It can be a lot like tax time—gathering all the documents with an imminent deadline – there’s a lot of paperwork involved and that’s why it’s good to start early. Once you have it prepared, then it’s time to meet with your mortgage advisor.

As a mortgage advisor it’s very important for me to have a meeting in-person, rather than trying to complete the process online or by phone. This accomplishes a few things: foremost, we can build a relationship of trust because you can get to know me and get to feel comfortable with me so you can ask any questions you might have. It’s difficult to build that kind of rapport over the phone; over the phone the client often feels rushed and forgets to ask questions. When we meet face-to-face, however, you remember to ask the questions and realize you can trust me to help you understand. Buying a home is something many people have never done, or only do a few times in their life, so there are a lot of questions. And getting answers to those questions is often the first part of the process.

Once all the paperwork and documentation is gathered and signed, we submit it to a lender. The lender will process the paperwork. We will also send it to an underwriter, who will review all the paperwork and documentation, and determine whether you are truly qualified for a mortgage. The underwriter will come back with a decision that we call conditional, or first approval. This is approval with a handful of conditions, and it always happens. They always come back asking to see certain things; at minimum it’s title work and an appraisal. From there, it can be many other things, but that’s why I work with you to give them as much documentation upfront—it lightens the load. At this point, I’ll come back to you, the client, to work on getting any additional paperwork needed. I’ll also ask you to start shopping for a homeowner’s insurance policy. In the meantime, I’ll have ordered the appraisal, and we’ll have the attorney order title work. We coordinate all of these, and once we have all the paperwork again—the conditions, the homeowner’s insurance, the title work, and the appraisal—we submit that back to the underwriter. The underwriter clears, or approves, the file (hopefully!), and we are in a position to set up a closing. In a nutshell, that’s the process, and it can be long and tedious.

Not everybody does it that way. I’ve seen mortgage brokers who submit the paperwork and then disappear; the clients have to somehow navigate their way through the process and the people without a designated “go-to person.” This is especially confusing when there are so many people involved in this single transaction. You have the attorney, realtor, mortgage advisor, lender, the lender’s staff, underwriters, and processors. It goes on, because you also have the appraiser, inspector, and the title company. If nobody takes charge to keep things moving in the right direction, it flounders.

The best advice I can give is to be organized and keep all your documentation together. Those who do, who know their passwords (to access statements, paycheck stubs, etc.), and who respond quickly to requests often have a great house buying experience. For those who aren’t organized, and who don’t have all their information together, it seems like the most tedious process. When I ask for more paperwork or documentation they can’t believe it and treat every request like a chore. Those are the people who think buying a house is the worst process. The process is the same, but it matters how you approach it, and who you choose for your mortgage advisor.

I tell my clients upfront: “Look, you’re probably going to be sick of me by the end of the process, but I’m going to keep you moving forward, I’m going to make sure you understand where you are in the process, and I’ll be your go-to person. I’m there for you day and night, weekends, and when you can’t remember what to do next. Call me anytime.”

Closing costs are pretty expensive these days and seem to go up every year. I guess with more government intervention, closing costs go up. I look at closing costs as being comprised of two sets of costs. One set of closing costs is what I tell people are junk costs and really, that’s what they are. They are all the costs you have to pay to get the loan done, or to close on your home, and you will never see that money again. These include the attorney fees, title fees, survey, insurance, flood certification, appraisal, and home inspection. These junk costs are a big part of the overall closing costs.

The other set of closing costs are what we call prepaids and reserves. Prepaids and reserves are for your property taxes and homeowner’s insurance. The lender takes escrows in order to pay these for you. At closing, they take a couple months worth of property taxes and a couple months worth of homeowner’s insurance. Every month as part of your mortgage payment, you pay one month worth of property taxes and one month worth of insurance, and then they use the amount from escrow to pay these bills when they are due. Those are prepaids and reserves. You also prepay on your mortgage when you close, so there’s interest due at closing, too. Together, these comprise the second set of closing costs.

Altogether, they can be very costly. Prospective buyers should talk to a mortgage adviser before they start looking for a home so they’ll know exactly what to expect for closing costs. Although the amount will not be exact, you can get a rough estimate so you can save for your down payment and closing costs. If you’re a little short, we can work around that by building a seller credit for closing costs in to the purchase price. There are multiple ways, but that’s just one example. A lot goes into the closing costs, and as the mortgage advisor, it’s my job to tell you all of your costs with a very accurate, if not on the high side, estimate of how much money you’ll need to bring to the closing table.

You can get approximations early on in the process, but I can give the most accurate estimate once you have a house under contract. Once I know the price of your home, I will sit down and go through every single possible fee that you could face for a closing cost. Some of them are what we call prepaids, as discussed above, that are paid outside of closing costs. You might also pay for the appraisal or home inspection prior to closing, but the rest of the costs get paid at closing. By the end of our meeting, you will feel comfortable knowing what you need to have at closing, and can make sure your finances are in order.

People really get surprised when I tell them how much closing costs are. I think they are a little shocked. Like I said, everybody gets a piece of the action with the new government guidelines. There are new appraisal guidelines that happened over the last couple of years, so we order appraisals from a third party management company rather than hiring the appraiser directly. So, now we’re going through a management company, and management companies cost money. The buyers are paying for that through an increase in appraisal prices. Title insurance has gone up in price. Attorneys are doing more with each file, so there fees have gone up, and rightly so. It gets more expensive each year to buy a house. The least I can do is get you an accurate picture of what your closing costs are going to look like. Call or email me today to discuss your situation!