Hey, Kyle, here winthehouseyoulove.com.
Today we're talking about how to shop for a mortgage and when, so this step
if you do it correctly, can save you literally tens of thousands of dollars
over a period of the term of your loan when you're shopping for a mortgage.
So what you're going to learn in this video is how to find the cheapest
loan option, which is not always easy.
But also when to shop, you'll also learn a comparison tool that literally, I hear
nobody talk about, but it's free and it's given to every single buyer, but most of
them don't even know how to interpret it.
And then number four, the three types of lenders that you can shop with.
All right.
So we're going to make this easy, breaking this down step-by-step.
First let's talk about the timing.
So the first thing that you need to know is you have a 45 day window to get your
credit checked as many times as you'd like, and it only counts as one inquiry.
Okay.
So you have an entire 45 days and everything counts as one inquiry.
Okay.
So this means you can shop with as many lenders as you would like
as long as it's the same types of same type of mortgage inquiry.
You're fine.
You can't do a mortgage and a car and a credit card.
Those are three different, but if it's multiple mortgage
inquiries, it only counts as one.
Okay.
And one inquiry is only going to affect your score by anywhere
from zero to five points.
It's not going to have this huge impact.
All right.
So.
What I would suggest is you start shopping about two weeks before
you're ready to go shop for a home.
And the reason why is you want to have some time to digest these numbers.
You want to have some time to be able to think them over.
If you get approved and immediately go into home shopping, you can
move just based off of emotion and maybe not based entirely off
of the information that you have.
Sometimes it's good to get the information, get prepared
and then take a step back.
So that leads us into our CalmMoment here.
See, when you're starting to shop for mortgages, you're about to start
a cycle of getting into the real estate world and things move quickly,
and it can be very overwhelming.
And you're going to be talking to salespeople who want you to move a
lot faster than you probably should.
So at this stage, it's really good for you to take a moment and slow down.
Okay.
And what that might look like is maybe you go on a walk with your family.
Maybe you take some time to relax.
Maybe you go have a drink, you know, do whatever you need to do
to take a moment to slow down and relax and think things through.
You don't have to rush into everything.
And at this stage, it can also be really overwhelming, and a little terrifying
to talk with somebody about your finances and the small potential that
you could not be approved for a loan.
I know that's a really intimidating and again, the best thing to do is gather
the information, do what you're doing.
Watch videos like this, get all the information, then create
a calm plan that's gonna take you where you want to go.
Okay.
So, let's talk about how you actually shop.
What you want to do is when you're applying with different lenders, you
want to apply within the same timeline.
And ideally you want to do this within a day.
And the reason why is because the market is always shifting, okay.
It has these moments where it's going up and it's going
down, and it's always moving.
So if you apply with the Lender A today, and then you apply with
Lender B two days from now, the market could have shifted entirely.
Sometimes rates change that quickly.
All right.
So if you're applying with lenders, you ideally want to
apply all within the same day.
If you can do it within a shorter timeframe, like a few hours, and that's
even better because you're going to see how all those lenders price out
in that exact same market situation.
You don't want to have a day where, you're seeing a quote from Lender A and then big
economic news happens and stock market changes and then you shop with Lender B.
That's not a fair, apples to apples comparison.
Also, you want to keep in mind that you're looking at similar features.
Okay.
So if you're comparing an FHA loan with one lender.
You want to look at the, another lenders, FHA loan.
You don't want to compare conventional to FHA and assume that FHA has a
lower rate so this lender is better.
Same thing with discount points.
If you go to a lender and say, I want to see your lowest rate
or what's your lowest rate?
Well, Lender A might quote you a rate with discount points, meaning
you're prepaying the interest.
So you're buying the interest rate down, but you're paying a fee upfront.
Now Lender B might not do that for you.
Okay.
They might show you without any points and you don't automatically say Lender A
is better because even though they have a lower rate, they have a higher fee.
Okay.
So make sure that you're comparing these side by side.
So it would be good to go to a lender and say, I'd like to see
what's the best product for me.
I'd also like to see one with maybe one point, do the same
thing with the other lender.
I want to see a loan with the best product, with no points
and one product with a point.
Okay.
So make sure you compare those side by side.
This one is huge.
You only want to compare Section A fees.
Now what's a Section A fee.
A Section A fee is what the lender charges.
Okay.
So, if you get a Loan Estimate on page two, there's in the top left
Section A, and this is what the lender charges, everything else
B through J is a third party fee.
This means that the lender isn't charging them, they're only estimating those fees.
So sometimes what I've seen happen is buyers make wrong decisions
based off of a lenders estimate.
Okay.
And this is how this works.
Let's say Lender A quotes you, and they charge $1,000 in their lender fees.
Okay.
So maybe it's an origination fee or an underwriting fee or processing
fee, whatever they want to call it.
It's the fee that is required to work with that lender.
So they charge you a thousand dollars.
And for insurance, maybe they're quoting you $2,000 per year.
And then you talk with this other lender, they're also charging a
thousand dollars to work with them.
but they only quote a thousand dollars for insurance a year.
Well they're lenders.
They don't provide insurance.
They're only estimating that for you.
Kind of as a good faith effort to show you what the total cost might be.
So it doesn't make sense to choose a Lender B just because they
quoted insurance differently.
So when you compare lenders, don't worry about the third-party fees.
They'll help you give a rough idea of what you might be paying total, but the lender
cannot determine these third-party fees.
They can only determine what are called Section A fees.
And you can ask your lender, Hey, what are your Section A fees?
These will be things like discount points, underwriting fee, processing
fee, sometimes there's other ones like a doc prep fee, there's, an admin fee.
It depends the lender might call it different things.
Okay.
So there's gonna be three different ways that you can actually
compare these numerically because the hard thing is you're seeing
these numbers in front of you.
But how do we actually tell which is the best one, because this one gives us a
3% rate with a thousand dollars in cost.
And this one gives me a 2.875% rate with $2,000 in cost.
Well, which one is better actually.
So three different ways.
Number one is you can look at the total cost.
So, you could do a calculator online, put in those fees and it would show you the
total interest and the amount of fees that you'd pay total over the life of the loan.
Okay. That's, it's a bit of a crude way.
It's not the best way.
But it is an option that you have another way is a lender could show you with
something called a total cost analysis.
So, working as a broker, that's what I would do for clients.
I'd send them a total cost analysis.
It would break down all of the loan options and show them the net cost
of each loan through different years.
So not all lenders have that, but it's helpful if you're working
with a lender who does that.
Something else is you want to look at the APR.
So the APR is all of the costs of the loan expressed as a rate.
It's not your interest rate.
Okay.
It's your interest plus all of the fees.
And then that's expressed as an annual percentage rate.
That's what APR stands for annual percentage rate.
So again, this can help you figure out, you know, a lower APR loan over
the period of that loan is going to be cheaper than one with a higher APR.
Okay.
And it's not just the interest rate, it's the interest rate,
plus any fees or discount points that are being included in that.
And then this one is huge.
This is the one that I don't hear anybody talk about.
I've watched several videos, in researching this topic and seeing
what other people are talking about.
No one has mentioned this.
The government has made it easy for you to compare Loan Estimates side by side.
And just a quick aside, a Loan Estimate is a document that a lender is legally
required to give you when they have a full loan application from you.
Okay.
So, this is what it looks like on page three on page three of your Loan
Estimate, there's this box that says comparisons, and this is super helpful
because it's going to show you number one in five years what's the total
you've paid in principal, interest, mortgage insurance, and loan costs.
And what's the principle that you've paid off.
Okay.
So five years is a really great, range to see because, you might
be looking at moving in five years or refinancing in five years.
Most people don't hold onto a loan for 30 years, even if they're
in the property for 30 years.
Okay.
So it's good to see these smaller increments.
It's also gonna show you your annual percentage rate.
Again, this is your costs over the loan term, expressed as a rate.
And then it also shows you the total interest percentage.
So the total amount of interest that you'll pay over the loan term as a
percentage of your loan amount, okay.
This is on every single loan and it's given to every single person
who starts a loan application.
So ask for a Loan Estimate from these lenders.
That way you can take a look at page three and see in five years, which is going
to be the better loan option for you.
Okay.
So who do you shop with.
In my recommendation, I think shopping with three lenders is a
really great place to be all right.
Shopping with more than three starts to get a little hectic.
I don't think you're gonna have some diminishing returns at that point.
What I would suggest is shopping with three lenders, three
different types of lenders.
So number one would be a local credit union.
So only you can find that around your area.
Number two would be a local mortgage broker.
So a broker shops with different lenders, for you.
And then the final one would be a bank or direct lender.
So think, something like Quicken Loans or Chase.
Okay.
Those would be big banks or big direct lenders.
Okay.
Getting three quotes from these three different types of lenders
is going to give you a really good spread and help you understand
exactly what's out there for you that might work well in your situation.
So that leads us into a pretty good segue into our sponsor.
Okay.
Our sponsor is Credible and they are a mortgage comparison website where you
can fill out a prequalification form.
It takes only a few minutes.
They do a soft credit poll, and then they're actually
going to show you pre-qualified rates from different lenders.
So they function as a broker.
Okay.
So this could be an option as a mortgage broker for you.
All right. The link is in the description.
If you want to fill it out, but it's simple.
It's easy.
You're going to see those rates immediately after you fill out that form.
Okay.
So link is in the description if you'd like to do that.
So with all of these lenders, you want to do a full application.
Okay, because if you don't do a full application than a lender, doesn't
have all the information that they need to qualify you for a loan.
And the last thing that you want is to give partial information, get a quote
that doesn't actually apply to you, and then try to close a loan and find
out you're going to have a different interest rate than you anticipated.
So you want to do a full application with all of these lenders and that's going
to help them make sure they give you the most accurate quote possible because
small things in your application can change the way that you get an interest
rate and the pricing for your loan.
And then also find someone who can help you with the planning
process and not just the rate.
You don't want just a salesman.
Who's going to say, I can give you the lowest rate.
You want somebody who's going to understand your goals a little bit,
ask you questions, you don't want to be asking them all the questions you want
them to ask you questions about what you're looking to do financially, what
your goals are financially, how long you plan on staying in the property.
And you want a lender who's going to help show you different loan options.
If you're just working with somebody who says, here's the rate.
And then they expect you to go along with that, then I'd have
some concerns that were raised.
I would want to work with a professional.
Who's helping me actually plan and taking into consideration the goals
that I have, both with where I'm living and the goals that I have financially,
because you're taking hundreds of thousands of dollars worth of debt.
Okay.
That money has to be moved in a direction correctly, or else it's
going to be more costly down the road.
So, if you're curious on, Hey, what's the average rate that I could get right now,
check out this video over here, in 60 seconds, you can find what the rate is in
your local market, without any signups, any forms without filling out anything.
You'll find the average rate to see if you're on track.