Buy a House Fast

Transparency is the name of the game in lending today. This is a good thing, since people want to know what they are paying for.  Closing on a house purchase includes many fees that impact how much money a borrower needs to fork over to the bank when the house closes.

Effective January 1, 2010, lenders have to lay out the costs for potential borrowers in a new Good Faith Estimate (GFE) form. Ironically, this form does not answer the bottom-line question of the amount you need at closing or your monthly mortgage payment. However, it does indicate which costs are guaranteed to stay the same and which might change.

The GFE concept is not new, but the form and the way the costs appear have been rearranged.  In the past, a customer could shop for a loan before he settled on a lender and obtain a written GFE, but still be clueless as to the real coast of the loan.  The best loan is not the necessarily the one with the lowest interest rate, as there are numerous other fees involved in obtaining the loan.

How lenders divvy up the fees to process a loan differ; the new form does not list each specific component. The new form may seem to offer less transparency as all the fees are lumped together, but they emphasize the total costs for loan origination, which is really the important thing.

The strategy is similar to that used by some grocery stores which stress total costs rather than the cost of one item. One week, Giant Eagle may have skinless, boneless chicken for $1.79 a pound, which attracts some shoppers.  The advertising folks at Giant Eagle hope you will do all your shopping there when you come for the chicken.  A shopper who patronizes another store could pay a little more for their weekly chicken fix, but still come out of the store paying a few dollars less for the same selection of items for a given week.  Some shoppers might pick up the bargains at Giant Eagle or Acme and do the rest of their shopping elsewhere, but for the majority of shoppers who use one store, the total bill for the cheap chicken and the rest of the items in their shopping cart could actually be more than from another store where prices were lower overall.

The new rules direct the borrower’s eyes toward the total cost of loan origination but not the total cost to finalize the transaction. Some costs outside section one of the form may change – including the interest rate. This is why the completed form does not offer the amount due at closing or the monthly payment.

In reality, you could collect GFE’s for several banks, perhaps even before you finalized the deal for your home and before the house was appraised or the title process was done.  These services, as well as the cost of insurance, can vary.  The bank can only provide you the costs it has a handle on; anything further would only be ballpark guess.

The government has mandated using the new form starting in 2010.  The question remains: Will this form really give consumers a better idea of the cost of credit?

Express Realty Services has no crystal ball to predict what you will pay each month or at closing, but we will do our best to keep you informed of all the costs so you are not surprised at closing.  When you buy an affordable DC, MS, or VA home from us, we will be with you every step of the way until those keys are in your hand and beyond.  If you want a Realtor® with staying power, call us today!

The common wisdom these days dictates that you get pre-approved for a loan before you get too far into the home-buying business. In this process, you submit your paystubs, W-2s, bank statement, and investment statements to a lender who will tentatively approve you for a loan up to a certain dollar value.  The statement from the bank, called a good faith estimate (GFE), will lay out the amount, terms, interest rate, type of loan, and closing costs.  A prospective home buyer might even seek several GFEs in a short time to compare what is available for someone with his credit profile. Some banks might approve a person for more than other lenders might.

Real estate agents like to see prospective buyers with GFEs in hand to zero in on homes at the right price-point and to make sure that they aren’t wasting their time on unqualified dreamers. Sellers who have been praying for a buyer are overjoyed when the buyer appears ready to go.

Unfortunately, it is premature to start packing and planning the housewarming party.  The “G” in GFE does not stand for “Guaranteed.”  When the buyer settles on a specific property, the lender could refuse to actually offer a mortgage for a number of reasons.  The property might not appraise right.  The market might have changes.  Circumstances for the buyer might have changed, such as a job loss or a drop in income.

This realization should be sobering to buyers.  Some things in life are a big surprise or out of one’s control. One thing buyers do have control over is their use of credit in the period between initial pre-approval and closing.  Increased use of credit during this time affects the debt-credit ratio used to determine credit-worthiness.

If you have found a great home and are waiting for things to fall in line for the closing, your natural impulse might be to shop.  You’ll need appliances and you may use the move as the perfect time to buy a new bedroom or living room set.  If you put these purchases on your credit card, you could end up with no home to put them in, especially if your debt-credit ratio is a bit high to start with.  To avoid jeopardizing your loan, your choices are to wait for the purchase, pay cash, or buy from a place that has a deferred financing option.  If you need a car, definitely put off that major purchase until you have keys in hand.

Need a REALTOR® to help you find a home and give you the best advice to reach a successful closing?  Express Realty Services offers a variety of renovated, refurbished, and remodeled homes in the Washington, DC area, including Maryland and Virginia.  Because we sell so many homes, we can help you find a first-rate mortgage lender with loan products and experience that are right for you.  Contact us today!