What to look for in a mortgage lender.
Real-world scenarios are important. They help us understand complicated processes like buying a home. What do we look for in a broker? A mortgage lender? Title? There are a lot of moving parts. Today I’d like to share a summary that my preferred mortgage lender sent me after his first meeting with new clients, first-time home buyers. I’m committed to educating my clients—both buyers and sellers—so that the decisions they will make come from confidence and knowledge. I look for a shared perspective and value from those on my team, including lenders, inspectors, title companies. Below is a great real-world example of what a knowledgeable lender should be doing with first-time homebuyers. Any buyers, actually.
The Buyers and their Situation
Cate and Nick are first-time homebuyers looking in the foothills west of Denver. Their purchase price budget is $750,000. After filling out the application and submitting financials this is a summary that my preferred lender, Rod, sent me of their meeting. As you’ll see it’s so much more complete than just getting them approved for a loan. It’s a strategy.
Wealth Building and Home Buying
Rod conducted a deep dive into a wealth building dashboard with Nick & Cate to explain their home-buying options and financial implications. They reviewed different purchase price scenarios, with Nick & Cate expressing interest in properties above their initial $750K pre-approval limit. Rod explained how mortgage payments, tax benefits, and down payment options would affect their monthly costs and long-term financial situation. The discussion covered the use of a buyer pass for property viewings and the process for selecting homeowners insurance through their current provider USAA.
Home Purchase Cost Breakdown
Rod explained the breakdown of costs for a home purchase, including one year of insurance in advance and three months each of insurance and taxes, emphasizing the importance of including all fees for an accurate estimate. He discussed the role of title fees and APR calculations, noting that some fees are determined by the listing agent rather than the buyer. Rod also compared the financial benefits of buying versus renting over 15 years, highlighting how homeownership would result in significant equity buildup compared to continued renting.
Home Buying Strategy Discussion
Rod and Nick discussed home-buying strategies, focusing on HOA fees and insurance for townhomes and condos. Rod explained that in these properties, HOA fees typically cover structural maintenance and insurance, while owners still need to purchase contents insurance. They reviewed a specific property example, discussing a potential $750k asking price and exploring a 2-1 buy-down strategy to reduce monthly payments. Nick mentioned upcoming salary increases, including a 5-7% raise in the next 4-5 months and a potential 10% raise afterward.
Mortgage Buydown Strategy Discussion
Nick and Rod discussed a mortgage strategy involving a buydown that would save Nick approximately $767 per month compared to his current payments with the option to refinance in 1-2 years. They analyzed a specific property at 35699 Genesee Village Road, comparing different purchase-price scenarios and demonstrating that the buydown strategy would be more financially beneficial than simply reducing the purchase price by $10,000. Rod explained that this customized approach was tailored to Nick’s specific financial situation and future income projections.
Property Offer and Financing Discussion
Rod and Nick discussed searching for information about a property at 35699 Genesee Village Road using Redfin. They reviewed photos of the property and decided on a total offer amount of $160,000, with Rod suggesting they would need mortgage insurance. They then began looking for interest rates for the loan amount of $637,000.
Mortgage Rates and Purchase Strategies
Rod and Nick discussed mortgage rates and strategies for a home purchase. Rod explained how interest rates vary by lender and showed examples from different providers, including Rocket Wholesale. They explored the possibility of using seller credits for temporary and permanent buy-downs to achieve a lower rate of 5.99%. Rod also mentioned that when rates drop, housing days on market decrease significantly, and explained the option to refinance later while retaining any remaining subsidy funds.
Mortgage Buy-Down Options Discussion
Rod and Nick discussed mortgage calculations for a potential home purchase. They analyzed different buy-down options, including: a temporary 2-1 buy-down and a permanent buy-down, comparing monthly payments and costs. Rod explained the process for evaluating properties, particularly those in unique locations or with unconventional structures. They also touched on considerations for townhomes and HOA requirements. Rod advised Nick to consult with Sean about specific properties and offered to provide similar analyses for future homes they consider purchasing.
As always, if you have any questions or want to talk more, drop me a note or just call! -SW
