Smart Moves by Ellen James Martin


Not all young adults who could qualify for a mortgage wish to buy a home while still in their 20s or early 30s. More are now waiting until they're settled in their careers or married before seeking homeownership.

Because many young home purchasers are uncomfortable with debt -- and are often saddled with student loans -- Guy Cecela, a leading expert on mortgages, says they typically opt for shorter mortgages than the 30-year type that has been standard in recent years.

Keith Gumbinger, a vice president at HSH Associates, which tracks mortgage rates for consumers throughout America, says there are now fewer large banks active in the mortgage market than during the last housing boom. But many other players are returning to the market.

"Consider seeking your home loan from a credit union, a community bank or a non-bank lender. These smaller lending shops, especially the local ones, can be very competitive on pricing," Gumbinger says.

Here are a few pointers for first-time homebuyers:

-- Plan ahead for your mortgage search.

The mortgage market is always changing. That means that loan products are constantly evolving.

Mortgage innovations usually involve various types of adjustable-rate mortgages. But such loans can differ dramatically relative to their names, terms and conditions.

Gumbinger says first-time buyers need as much lead time as possible to educate themselves on mortgage basics, to sort through alternative home loan choices and to compare lenders and rates.

As a first step, buyers can inform themselves through online resources. For instance, Gumbinger suggests that mortgage shoppers seek consumer information through his firm's website (

Understandably, most buyers favor traditional fixed-rate mortgages. But Gumbinger says buyers who expect to stay in their new home for just a few years might also consider a so-called "hybrid loan," on which the interest rate stays firm for three to 10 years before adjusting to market levels.

"Suppose you plan to buy a small city condo where you'll live for just a few years before getting married and moving to the suburbs. Then a hybrid loan could be a good deal because the initial rate will be lower than for the classic 30-year fixed-rate loan," Gumbinger says.

-- Hold out for a lender offering both a good rate and quality service.

Gerri Detweiler, a consumer finance blogger and author of "The Ultimate Credit Handbook," encourages first-time buyers to seek a lender who will instruct them on the complexities of home loans.

"In just 30 to 60 minutes spent with a friendly lender, you can learn a lot about mortgage fundamentals and maybe even get help to identify and fix flaws on your credit reports," says Detweiler (

How do you find an empathic lender?

Gumbinger says real estate agents are often a good source of names. But he advises you to look beyond their suggestions.

"If you reach out in your office, you'll probably find someone down the hall who's bought a house or refinanced lately. You can also canvass friends and family," he says.

-- Make sure you arrive at your lender's office well prepared.

To save time, there's no substitute for gathering key documents in advance of your meeting. Ideally, these should include recent pay stubs, your latest W-2s and a couple of years' worth of federal tax returns, as well as bank and savings account statements.

"They're necessary to help your lender set the upper limit on how much you can afford, a process known as 'pre-approval,'" Gumbinger says.

Gumbinger says that an in-person tutorial will help you clarify the whole lending situation and bring it into sharper focus.

What if the lender you contact resists your request for a tutorial? In that case, he says you should move on.

"You deserve to have all your questions answered in plain English," Gumbinger says.

-- Investigate your credit standing to get the best available mortgage rate.

Under federal law, you're entitled to one free credit report each year from the three largest credit bureaus: Equifax, Experian, and TransUnion. You can easily request these online (

In addition to your credit reports, you'll want to access your "credit scores." Such scores -- which draw on data from the credit bureaus -- seek to provide lenders with a quantitative measure of credit risk. Most lenders still use FICO scores, pioneered by the Fair Isaac Corp.

Generally, you need to pay a fee for your credit scores. One way to obtain them is through the Fair Isaac website: You can also receive credit scores through the three large credit bureaus. FICO scores range from 300 to 850, and the higher the score, the greater your odds of getting the best available rate.

Once you've chosen the home you wish to buy, it's time to get serious about making your mortgage application. And with your credit scores in hand, you can easily start comparing available rates.

As Gumbinger says, you may want to begin the rate-shopping process with the lender who tutored you on the basics. But he urges you to extend your search beyond the first lender.

"The more the merrier when it comes to rate quotes. But always remember, you're looking for competent service along with low rates," Gumbinger says.

(To contact Ellen James Martin, email her at