Now that you have the house lined up and the contract is good to go, you have to figure out a way to pay for the property, not an easy feat to accomplish in this day and age.
A while back, lenders were giving out loans like they were candy, not requiring any deposit on the property and, in a turn of events that still continues to shock and haunt me, allowing buyers to walk away from the settlement table with keys and some cash. Thats a little bit of why the economy is the way it is right now, and dont expect the same kind of treatment to occur ever again.
Now, Im pretty sure you dont have hundreds of thousands of dollars in cash lying around in your house or, at the very least, sitting in a bank account somewhere. If you do, more power to you, and, on a side note, you should probably talk to someone about making that money work for you instead of sitting in a bank. But I digress.
If youre going to need to borrow money, youre going to need to talk to a bank or a mortgage broker. In my experience, both have their pros and cons.
The banks are good because they have lower interest rates, generally, and they dont have a lot of exotic extra fees you may find on a settlement statement at closing (thats the next part).
However, banks like to deal with customers, so if youre not a customer of a particular bank, they likely arent going to give you the time of day, even after you open up an account by depositing twenty-five clams into a standard checking account. Plus, some banks have slightly higher legal fees, as they have attorneys actually draft loan documents to order.
So if your bank doesnt have the greatest interest rates, its time to go to a mortgage broker, which is not a bad thing.
In fact, its becoming a safer and safer thing to do here in Maryland. Over the past year or so, mortgage brokers have had to undergo a licensing process through the State of Maryland. As a result, there is more accountability in the profession than ever before there are actually penalties and fines that can be levied against fraudulent mortgage brokers, something just a few years ago you would have to attempt to engineer through the long, drawn out civil litigation process.
You do not, however, want to go to a mortgage broker based solely on the recommendation of your Realtor. Yes, the real estate professional has been in the business quite a while and deals with mortgage brokers a whole lot more than you do, but it is always good to shop around. Check rates. Check prices. Check your gut. Chances are youll end up with the mortgage broker recommended to you by your Realtor, but at least youll have some peace of mind that you shopped around a bit, and your gut will feel better. Trust me.
Once youre with a reputable broker that makes you comfortable, pay attention to the fees that they charge, especially origination fees and discount points.
Origination fees are basically, the brokers fees for bringing the loan into the bank; discount points are fees you pay up front to receive a better interest rate. There may also be fees dealing with a credit report, flood certification, and an appraisal. Pay what you can outside of closing; this will give you more peace of mind and will lower your bottom line on settlement day.
Ahhhh, settlement day. Its like Christmas, New Years Day and your birthday, all rolled up on one. And because its so big, this is whats known as a tease for Part 3.
Christopher L. Markham is a general practice attorney based in Frederick. He can be reached at email@example.com.