How To Get The Best Interest Rate & Mortgage When Buying A Home In L.A
Shop for the best rate & terms
for a home purchase loan
If you're buying a home in the Los Angeles area and you're not paying cash, you are likely looking to find the best bank, mortgage lender, or broker that will provide excellent service and the lowest interest rate with little to no fees.
Below is a quick 5 step guide on how and when, during the home buying process, to shop for the best home mortgage loan.
1) Once you’ve decided to buy, one of the very first steps in the process is talking to a loan officer. The initial person you speak to can be a mortgage broker, a direct lender, or a loan officer at your local bank. There are three goals you should aim for when it comes to your initial conversation or consultation with a loan officer. See A-B below.
A) Find out much money you qualify for and how much money you will need for your down payment and closing costs. It’s important to discuss example mortgage payments and if there will be any potential hurdles in having the loan approved during the underwriting process.
B) Make sure they run your credit, review all of your financial documents, and provide you with a DU (desktop underwriting approval) or a conditional/pre-approval approval, which usually means all you need to do is find a property that will pass the appraisal inspection and appraise for your purchase price. **PRO TIP** Do not settle for a pre-qualification, which usually entails only verbal communication and no verification of income documents and credit reports.
C) Verify that the lender you meet or speak to is responsive and will be able to provide you an updated approval letter or adjust your approval letter in it needs a revision when you find a home you want to offer on. This portion is crucial, especially if there are competing buyers on the house.
2) Make sure you do not leave any of your income documents with the loan officer. If they need copies, be sure you email them over, or they scan a copy at your meeting. Create a dropbox, desktop, or google drive folder of all of your income documentation, so it’s ready to be provided to other lenders when you do begin to shop around for a mortgage after you’ve found the property you want to buy.
3) Be sure to have the lender provide you a written copy of your FICO score. You will need this later when you shop.
4) Find a house. While you are searching for homes, I suggest you casually call around and see what kind of rates and fees other lenders are offering, but they aren’t relevant until you find your property. Interest rates and program incentives change daily. What you are quoted today could be lower or higher in the 30, 60 or 90 days it’s taken you to find your home.
Make sure no other lending institutions run your credit, until after you’ve found your ideal property, and your offer is accepted. Having your credit ran too many times could lower your score. There is no point in having your credit ran unless you know you’re in contract and have the real ability to purchase a property. If lenders want to run your credit before your offer is accepted, I suggest providing a copy of the FICO scores the initial loan officer provided you in step 3 above.
5) The day your offer is accepted or the day after acceptance is the best time to shop for a loan. Some lenders may not provide a written quote until they run your credit. This is ok if they’ve verbally given you great terms and a low-interest rate and maybe someone you are likely going to commit with. My suggestion is to call 3 or 4 different lenders, for example, a large bank, mortgage broker, a direct lender, and credit union if you have a relationship.
Time is of the essence. All California purchase contracts have a loan and appraisal contingency expiration date, which means you need to pick a bank immediately, which is why it’s not a bad idea to start calling around to test the water while you’re looking for homes. If you are genuinely in the market to shop, then I suggest taking a half day or full day from work to get this accomplished as it will save you thousands in both the short run and long run.
Do you have more than 100k in retirement funds that you may be willing to transfer from financial institution to another?
For example, if you have $500,000 in a Morgan Stanley managed retirement account but are willing to move the funds to JP Morgan Chase, then the bank may be willing to offer you an interest rate discount on your mortgage anywhere from 1% point or more to earn your business. I’ve seen this several times and it may make sense, but always consult with your accountant and financial advisor before making any big moves.
Also, leverage your real estate agent. If they are active in the market, they will be a tremendous resource.
Why go through all of this trouble? Simple. Once your offer is accepted, in the eyes of a lending institution, you are business that is extremely likely to happen for them if they can earn it, which means they are more likely to sweeten the pot or lower their interest rate and fees.
Ask if they can offer a credit for closing costs, provide a no-fee loan, and at what rate?
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