Smart Moves by Ellen James Martin

Tips for Mortgage Shoppers

Maybe it’s a good thing economists’ salaries aren’t based on the reliability of their predictions. Many economists forecasted that mortgage rates would ascend in 2019, but rates have dropped somewhat in recent weeks, to the delight of homebuyers.

Mortgage specialists say current buyers react in a very positive way when rates fall. That can help explain why sales of existing homes surged 11.8 percent in February, according to the National Association of Realtors (realtor.org).

“The reality of lower-than-expected mortgage rates is now the overarching story for real estate. If you have top-flight credit, the financing door is wide open,” says Keith Gumbinger, a vice president of HSH Associates, which tracks mortgage markets across the U.S.

“Lower rates mean more buying power. They’re getting more people off the fence about buying,” says Marty Qualls, who works for a Utah firm called Primary Residential Mortgage Inc.

Mike Hummel, a mortgage broker in New Jersey who’s worked in the field since 1998, says the change in rates has come at an opportune time for wannabe homeowners planning a springtime purchase.

“People are banging the doors down again,” says Hummel, though he cautions that not all neighborhood markets are benefitting equally from the rate improvement.

Are you planning to soon venture into the housing market and wish to find a solid lender to help you gain mortgage preapproval? If so, these few pointers could be of help:

-- Shop around for recommended lenders.

In the aftermath of the housing downturn of 2008, the federal government became increasingly involved in the mortgage market. The result is that government-backed mortgages now represent a major share of all home loans made in the United States. Meanwhile, there’s been a decline in the number of mortgage brokers -- intermediaries between banks and consumers -- operating in the field.

“Some mortgage brokers are gone. But more of the brokers and lenders who are left are real pros in their field,” says Guy Cecala, who heads Inside Mortgage Finance, which publishes industry newsletters and reports.

Do you have flaws on your credit reports? In that case, Cecala urges you to choose your lender especially carefully.

“You always want to shop around -- not only for the best possible rates and fees, but also for a lender who offers good service and processing speed,” he says.

-- Look to personal referrals to create a short list of lenders.

As Cecala says, real estate agents are in a good position to know which lenders will offer the smoothest and swiftest loan processing. After all, they work with lenders year after year and need to identify those most likely to get their deals to the finish line on time.

Though mortgage brokers, who shop your loan application to multiple lenders, are now fewer in number, many home loans are still being made by large banks, community banks and credit unions. In addition, there’s been an increase in the number of online mortgage lenders.

“Contact at least three different types of lenders before making your selection. Try to include on your list one mortgage broker, one major bank and one smaller bank or credit union,” Cecala says.

Friends and co-workers can be excellent sources for names of reputable lenders, especially if they’ve taken out a home loan within the last year, says Dale Robyn Siegel, a veteran mortgage lender and author of “The New Rules for Mortgages.”

“I still believe in the old-fashioned method of asking around for referrals,” Siegel says.

-- Don’t divulge your Social Security number prematurely.

Of course, no self-respecting lender will guarantee that your mortgage rate has been locked in without first pulling your credit scores. But that doesn’t mean you should give out your Social Security number (the key to pulling your credit scores) while you’re still comparison shopping, Gumbinger says.

Granted, those with credit scores at the highest end of the range are eligible for the best possible mortgage rates. Still, you shouldn’t have to release your private information just for routine rate shopping.

-- Beware of excessive closing costs imposed by a lender.

There are a number of costs and fees involved in mortgage lending, and only some of them are imposed by lenders. These lender-based fees include the cost for a home appraisal and a copy of your credit report. Also, other charges, often called “junk fees,” can be imposed by the lender at the time of closing.

To better protect consumers, the U.S. Department of Housing and Urban Development (hud.gov) has set tighter rules to let borrowers compare lenders on the basis of their charges. As a result, HUD now requires lenders to give borrowers an early and accurate listing of their closing costs.

But Gumbinger says it’s up to consumers to carefully compare a lender’s charges before deciding whether to proceed. To do this, it’s important to study a copy of the lender’s estimated charges. This form should list all the fees you’d pay at closing, with a very small margin for changes. The lender must give you this estimate shortly after you apply for a mortgage.

By carefully reviewing your lender’s estimate of charges early in the process, you’ll have a chance to ask for lower lender fees or to change lenders to obtain a better deal.

Though mortgage lenders face strict disclosure requirements, their fees have also climbed because of their heavier workloads, according to Gumbinger.

“One man’s junk is another man’s cost of doing business,” he says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)