This post is about what to look for in a mortgage broker to get the best deal on your first home mortgage.
Buying a house can be daunting, especially if it's your first home. There are so many things to think about, action items to complete, and money to exchange that it becomes overwhelming at times.
With so many moving parts, it's important to focus on the things that will make the biggest difference in your home buying experience and the largest impact on how much money you'll spend.
The most important thing is to find a good mortgage loan.
I categorize a good mortgage loan as one that checks the boxes on the “Trifecta”. (Yes, this is just what I call it because these 3 things have been the key to finding the best home loan for me.)
But first, let's discuss other important elements to do first. In this post, we will discuss the following:
- How to Find a Mortgage Broker
- What to Say to a Mortgage Broker
- The “Trifecta”: 3 Things to Look for in a Mortgage Broker
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How to Find a Home Mortgage Broker
The first thing you'll want to do is look for a mortgage broker. The mortgage broker is the person (and company) that give you the home loan.
Go to google and search “low mortgage interest rate”, “home interest rate” or “best mortgage rate”. Anything similar will do.
You'll see rates start to pop up for 30 year fixed, 15 year fixed, etc.
I've always found some of the lowest rates on Bankrates.com. However, the important thing to keep in mind is these FLUCTUATE by the hour!! In fact, sometimes they will fluctuate by the minute!
If you see a good rate, write down the company.
If you aren't seeing any good rates, don't fret. Go back and check in an hour.
In fact, one of the companies I work with for my home loans told me that they offer different rates depending on the hour due to quotas they need to hit. If they want more loans, they lower the IR for an hour to get phone calls in. Therefore, an interest rate you get may be different from an interest rate your neighbor gets an hour later. (Not all companies operate like that, but it's food for thought.)
Moral of the story is to continue checking at all times of day and on different days.
Write down the companies you found and the corresponding interest rates they advertised.
Next, we'll call them to inquire.
Note: Always call the company to inquire about the advertised rate you saw within 30 minutes of seeing the rate.
As I mentioned, the rates can change frequently (by the hour or even by the minute) so you want to make sure you call when the rate is still being advertised so that you can lock yourself in with it.
What to Say to a Mortgage Broker
Next, call the companies that you wrote down within a few minutes of finding them online. (Don't wait per the points above).
Tell them you're looking for a home mortgage and that you saw XYZ rate advertised online. If they tell you that you have to pay points, let them know you don't want to pay points and ask what the interest rate would be with no points. (I personally don't pay points and don't recommend it, but every situation and every person is different).
Reference a home mortgage calculator to see if it makes sense for you to pay points.
A point=A percentage of the loan deal
Example: 1 point is 1 % of the loan you'll be taking out.
If you are taking out a home loan for $300,000 and the mortgage broker wants you to pay 1 point to give you a good interest rate, you'll be paying $3,000 up front, but you'll get a lower interest rate.
Not my favorite thing because the math doesn't typically work out in my favor…
Write down the interest rate they are offering you with no points (and the one with points if you're interested in that).
Next, you'll want to ask the following.
What to Ask a Mortgage Broker For
If the interest rate is appealing to you, ask them to send the rate quote in an email with all fees included.
Make sure you stress that you do not want surprises later so every single fee needs to be included in the rate quote they send you.
Feel free to remind them that you will not go through with the loan if there are surprise fees so it's critical that they list everything on the rate quote.
No exceptions.
Also, make sure they send you a rate quote with both the MONTHLY amount and the TOTAL amount for the home mortgage.
DO NOT accept a rate quote with just the monthly amount.
You need to see the WHOLE picture and every cost associated with buying this home. The monthly amount does almost nothing for you in the whole scheme of things.
Also, make sure you understand EACH INDIVIDUAL cost associated in the monthly amount.
I also HIGHLY RECOMMEND checking their work with a mortgage calculator. (I have one linked for you here under calculators.) In fact, it's a must. It will take you 2 minutes.
CHECK THEIR TOTALS on the monthly payments.
It's crucial if you want to get the best deal and avoid being taken advantage of.
I recently had a friend that was buying her first home and asked me to review the mortgage quote for her since she was about to sign.
She thought she was getting a great mortgage because the monthly amount was much cheaper than other lenders.
They had given her a monthly total and a yearly total.
However, when I ran the numbers, it wasn't adding up. It didn't make sense.
I was stumped as to how they were getting to those monthly numbers.
Therefore, I dove into it more and found that they were actually adding the tax refund she'd get at the end of the year INTO HER MONTHLY AMOUNT!!!
I couldn't believe it! I highly recommended she steer clear of using that company because that was dishonest.
1.) The tax refund will be given to her at tax time in April so it isn't a monthly discount you get instantly.
2.) Every year, the tax refund on a new home will go down because you're paying less in interest and contributing more to principal so she won't be receiving that much in refunds forever.
3.) That tax refund should be icing on the cake for a home buyer at the end of the year and should not be factored into one's decision to buy a home.
Avoid companies that use this tactic. Know every single number they are giving you.
Alright, I digress.
Now, continue calling and collecting rate quotes until you have a good list together. The key is to shop it out. Call 3 brokers, call 5, call 15. Do your homework. Be diligent.
Diligence now will pay dividends down the line for your bank account.
Next, we'll dive into the “Trifecta” and what to look for to find the best deal on a home mortgage loan.
The “Trifecta”: What to Look for in a First Home Mortgage
I like to look for mortgage loans that have the following 3 things as these things will save me the most amount of money and cause the least amount of stress.
(Less stress is ideal in my life!)
1.) Low Interest Rate
Look at the home loans with the lowest interest rates.
This is the most important element to a home mortgage. Every single fraction of a percentage counts.
Even .15% is a lot of money over time that you could be saving!
Be open to using online brokers. You no longer need to meet with a broker in person and you can get the best interest rate by finding online banks.
I've talked with many people that came to me for advice. I told them to shop out the rate. They then told me “oh, it's only a .5% difference” so I'll just go with the broker my realtor recommends.
LOL
Ya'll, that is just plain silly.
Example: On a $300,000 home with 20% down, the difference between a 4% interest rate and a 3.5% interest rate is about $100.
Over a year, that's $1200.
Over 30 years, that's over $24,000.
You're telling me you're willing to give up your hard earned money just for fun? That's straight crazy!
That example was on a $300,000 house, but if it's a more expensive house or less than 20% was put down, it would be even more of a difference!
Check for yourself by using a mortgage calculator. Linked one for you here.
The moral of the story here is to look for low interest rate mortgages. Make sure that interest rate does not make you pay points to get it or that you thoroughly understand how you will recuperate the cost of the points.
Confirm that with the broker.
There’s a lot of money that gets left on the table from people not doing their research to maximize their financial potential. In fact, one mortgage broker I used told me that they rely on people not doing their research! Yikes! He told me most (as in 99%) people don't. They just take the brokers word for it.
(I'm clearly a nightmare for brokers because I check EVERYTHING!)
Now, that's just one piece of the puzzle. Let's look at the other things that make up the “Trifecta” when getting your first home mortgage.
2.) No Closing Costs or Additional Fees
Look for a loan that has absolutely no closing costs.
Did you hear that's impossible?
Let me guess…you googled it and it also says it's impossible.
Then you talked to a friend or a realtor and they said it was impossible.
I know. They all told me that too.
Hint: THEY'RE WRONG.
I don't represent a mortgage company and I'm not sponsored by a mortgage company. I'm not even going to share a name of a mortgage company that does this. This is just genuine information from someone that wants to help you.
(I know, weird right?)
You can absolutely find mortgage companies that offer NO CLOSING FEES for NO POINTS with NO CATCHES.
Now, you'll say that they'll give you a higher interest rate.
Also not true.
I can say this because I've done it myself successfully…several times. My friends and family have too. My neighbors have as well. I clearly told them all about it and then they went and did it for themselves.
In fact, these no closing fee companies are growing rapidly and when you find one, check their reviews! You should see that they have tens of thousands of happy customers that can verify that it is truly a no cost mortgage loan.
Every single time, I did research on the best interest rate through 30+ companies. (I know, I'm crazy but I love a good deal) The no closing cost company gave me the LOWEST INTEREST RATE by FAR! In fact, the next highest was .5% more AND had closing costs. That's ridiculous!
It's so unheard of that unless you know someone that's done it, people think and say it doesn't exist. It's new and it's up and it's spreading like wildfire.
Why Do they Offer No Closing Costs?
Since no closing costs are so unheard of, some companies got smarter.
They decided that they would offer a no closing cost loan to attract more people to do loans with them.
This is similar to when Robinhood decided to be the first company to not charge fees for trades.
It was unheard of and other companies said anything they could to bash Robinhood and make them not look reputable.
And now look at the other companies…
They're now ALSO not charging fees for trades.
(P.S. If you want to learn how to trade stocks in an easy to understand way, I have a free tutorial here.)
I bet you're now wondering, what's the catch?
How are they able to offer no closing costs?
Companies like this typically own all of the companies that are involved in a home loan.
They own the title company and the brokerage company, etc. Therefore, they aren't paying a middle man to complete the loan.
How do they make money?
They make money by selling your loan to another company. In fact, they'll sell it really fast (usually before you even make your first payment).
However, regular loan companies do this as well so you should expect it either way.
How to Find Them?
Do your research. Look for them online as they most likely won't be in your same town.
Keep looking and you'll find one.
Now, we must address the last part of the “Trifecta” as well. The first two elements are very important, but this next one also carries some weight and should be a consideration.
3.) Company You Trust with a Quick Close
You will be giving these companies your financial statements so working with a company and a person you trust is crucial.
If you are seeing red flags, run. Don't walk. I'm sure it would be fine, but I need to have a good feeling and have reassurance before going through with a deal.
Luckily, there are plenty of rules and regulations these days that help you avoid bad situations.
However, when you're talking with the broker, notice how the conversation is making you feel. Do you feel anxious? Are you overwhelmed? Are they being pushy? If so, it may not be a good fit.
If they can take the time with you and be patient enough to explain every single cost to you effectively, that is the sign of a honest and good broker.
Check both the companies reviews online and the broker's reviews.
Look the broker up on Linked In.
In fact, I always ask for their personal Facebook and their Broker License #. I then look their license up the state's site to make sure there aren't any legal cases against them.
If you're feeling daring, ask them how you can write a claim against them if they lie to you or steer you wrong. I've asked this multiple times and the good brokers always laugh and then show me right away. (I'm probably a nightmare for them to work with, but I want to make sure myself and my money are well taken care of.)
Plus, a good broker that is being honest will offer the information up themselves and show you how to report them without you ever asking (that's when I realized it's good practice to do so).
A quick close will help you move on with your life faster and leaves little room for error.
Companies that are efficient can do a quick close and stick to it.
What to Look for in a First Home Mortgage: The “Trifecta”
In summary, look for a first home mortgage broker that offers a low interest rate, no closing costs, and is trust worthy with a quick close.
That winning combo will keep the most money in your pocket and allow you to get the best deal.
I hope this post was helpful for you.
Let me know if you have any questions! Good luck!
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