What is most important in choosing a mortgage lender?

[Math_Rocks]

We are very close to having to make a final decision on who to go with for our 100% new purchase mortgage. I have quotes from 3 lenders that I feel pretty good about but the programs are very different and I am having a VERY difficult time figuring out who to go with. (And I may need to consider a 4th.)

For those of you who have gone through this process, especially if you were in our boat needing 100% financing, would you please share your thoughts on how you picked a lender?

(It is so odd going from being afraid no one would want to finance us to having so many options. The mortgage industry really is a strange place right now!)

[Anonymous]

It depends on your situation and your goals. Can you explain a little about the 3 quotes: Program type, rate, closing costs, prepay penalty, how long do you think you will be in this mortgage prior to refinancing or selling? Also, when are the quotes from? Have the rates been locked-in?Rates have been trending upwards the last week and a half and the rates you were quoted may not be accurate today.

[MM1234]

I was reading a good book on questions to ask and one of them was if you need LOW DOWN PAYMENTs or NO $ DOWN sometimes you should consider a local bank cause they know the market and value of local housing and can sway things your way. BUT - if the rate is better on an internet or other bank then thats ok in the long run if they already know you are going NO $ Down. I think thats what I understood by your 100% mortgage.

[Math_Rocks]

Our situation is that I am finishing grad school and will be new faculty at a University in the South starting in August. Having been on the infinity plan for grad school, I have lots of student loans and zero down payment but I am headed to a very stable, long-term position. We have a daughter with autism and are trying to keep the changes in her life to a minimum so we want to get into a property there and settle long term. (We have an FHA loan on our current home and do not expect to net much when we sell.)

None of the programs have a prepay penalty and none are locked since we haven't selected a property yet. We leave for our househunting trip on Sunday and will need to get everything figured out next week since I have to be back here to teach the week after and will be teaching all Summer until we move down there.

Here is where I stand with my quotes:

QuickenLoans

We qualify for up to 170K with an interest-only loan at 7.125. Zero points and costs amount to about 2100. I need to pay $500 to commit and get completely pre-approved within 24 hours.

Cap One

We qualify only up to 150K and its an 80/20 at 6.75 and 12.21 resp. with about 2500 in closing costs (again zero points). We have an approval letter in hand for the 150K.

Local Bank down there

We qualify for up to 170K with a straight 30 year fixed at 6.375%. However, all their loans have a 1% origination so costs are about 4300. They do not do pre-approvals but I have a pre-qual letter for the 170 and that can change quickly to approval once the property is selected.

Possibly Wells Fargo

I just heard from them and they have a 103% loan that I might be interested in.

I feel like all these programs seem reasonable with us having no down payment, high DTI with just my income and middles FICO's of 704 & 703. All of the lenders have suggested that we try to get the seller to pay as much of the closing costs as possible.

That is probably more info than you wanted! Thank you for trying to weigh in. I hope to hear  more from you.

[Anonymous]

Hi Math_Rocks,

I vote for the third option (fixed 30 yr w/Local Bank Down There), assuming you have the cash for the origination costs.  But better yet, can  you play one lender off the other?  Tell Local Bank that you'd love to go with them PLUS move all your personal accounts there, but CapOne and Quicken gave you a much better deal on the closing costs. 

[Anonymous]

Never too much information. Is there mortgage insurance on the 2 100% options?

Option 3 does look good numbers wise. True, the closing costs are a bit more, but after 27 months you will begin to see the savings from the lower payments. The lenders bring up a good point, get the sellers to pay as much of your closing costs as possible. Depending on your market, this may or may not so easy.  In a buyers market like here in California, sellers are often more than willing to cover your costs so they vcan sell their home.

If the sellers aggrees to pay closing costs, definitely # 3. I am not sure whiy you are considering 103% financing on a home.

Also, I don't care for the $500 up front to get pre-approved. While an up front fee may be a part of financing for a commercial property, it is not a part of residential.

[Math_Rocks]

Thanks for the reply!

The reason I am considering the 103% loan is that I would not have to negotiate for the sellers to pay as much (and thus potentially lower the price of the home a bit).

We have 2300 in savings and 3600 in an IRA. I definitely will not touch the latter and want to use as little of the savings as possible so we have a couple months mortgage in the bank starting out.

Does that change your vote?

[Math_Rocks]

Oops. Forgot to reply that both of the 100% loans DO have MI.

[Anonymous]

Is MI the same thing as PMI?

Is the university paying your relocation costs? 

[Math_Rocks]

That's funny - I have always called it PMI as well but everybody I talk to says MI. Yes, they are the same thing.

The university will pay up to 4K for moving expenses which is far short of the actual cost to move. Still trying to figure out how to come up with the difference without touching savings.