Candid Questions and Frank Answers

For first time homebuyers, the process of shopping for a home mortgage can seem intimidating. But according to Steve Doran, mortgage department vice president at Fleet Mortgage, borrowers have nothing to fear.

Q: At what point should a borrower approach a loan officer for mortgage advice?

A: It's never too early. In fact, contact should be made with a loan officer when discussion first turns to buying a home-- certainly it should be before any properties are actually visited.

Q: Why make contact with a loan officer so soon?

A: Two very practical reasons-- to become pre-qualified or pre-approved for a loan before house hunting. You will find many sellers or mortgage brokers need one or the other.

Q: What is the difference between the two?

A: Pre-qualification is simply based on a conversation between the lender and the borrower about income, employment, credit and savings. There is no validation, no underwriting of the data supplied-- it's a process than can be done over the phone in fifteen minutes. This gives the customer an idea of their loan worthiness and how much they might expect to qualify to borrow.

Pre-approval is based on actual submission of income, assets, credit and employment information. Assuming the information is accurate, the loan officer can give the borrower a written loan commitment, subject to a property appraisal. We strongly recommend first time buyers consider taking this step to make them more credible buyers in the marketplace. Pre-approval will give them leverage when competing for a property and tells the seller that the buyer can close the mortgage. I would encourage going through this process if the borrower intends to buy a home within six months, otherwise the information goes stale. Pre-approvals are generally good for ninety days.

Q: Is the relationship between borrower and lender one that extends beyond the initial meeting?

A: Most definitely. We encourage loan originators to stay in touch with pre-qualified buyers, keeping them updated on new products, trends and rates in the mortgage world. In fact, we have loan officers who work with people for a year or more before they finally find a home. It's an ongoing relationship and a very intimate one in many ways because buying a home is a huge financial experience and can be very emotional.

Q: How does one find a loan officer?

A: I'd say the best way is word of mouth. It's a lot like moving into a new town and you want to know the best place to get a haircut, or who is the best butcher or best lawyer. Ask people who have already bought a home because they'll tell you the good, the bad and the ugly about their borrowing experience. If the buyer feels uncomfortable talking to people, check the yellow pages-- just make sure to speak with two or three different loan officers-- don't jump on the first one. It might be a good idea to visit a big bank, a little bank and a mortgage broker. Whoever you choose, it's important to work with someone who is honorable and [trustworthy].

Q: Okay, you've found a lender or broker you trust. What kind of mortgage advice questions should one ask?

A: Whatever's on your mind. A good loan officer wants to encourage the homebuyer not to be intimidated. The borrower is in charge, not the lender. Don't allow yourself to become uncomfortable, to feel pressured or pushed to accept a loan program you don't want or a rate you consider too high. Again, take control. Take control of the process by becoming educated.

Q: And how does one become educated about the mortgage process?

A: I recommend a first time homebuyer education course. These courses are free, or very low cost, and are given through community development groups most everywhere in the nation. They usually last four or five evenings, maybe an hour each time-- but for that amount of time the homebuyer will learn, not only about mortgages, but about the appraisal process, the closing process, managing credit, working with Realtors-- a whole bunch of valuable information about probably the most important financial transaction any of us will ever go through. Every lending institution maintains data on these programs or you can check with state or local housing agencies.

Q: Many first time buyers are reluctant to go for a mortgage because of sub-standard credit, checkered employment history or because they lack a substantial down payment. What mortgage advice do you give to them?

A: I say there is a mortgage program for nearly everyone. One thing the first time homebuyer will find is flexibility. The perception that one needs a large down payment or must have angelic credit or needs to be in the same job for two straight years is part of an earlier mortgage era. The first time buyer can expect to see programs that offer low down payment options, programs that work around credit problems, blank credit or bankruptcies and others that deal with employment issues. There are even some no income, no asset programs but, in return for no verification, the borrower can expect rates that are generally much higher. You'll also need a great credit history and a larger down payment for those types of programs. Bottom line is, don't let a blemished credit history prevent a conversation with a loan officer.

Q: The thirty year fixed rate mortgage seems to be the traditional route for most first time home buyers. Are there other options available?

A: The array of mortgage products is mind-boggling. As I've said before, there is virtually a mortgage for everyone. Take a look at all of your options and don't make a rush decision. It's true that most people immediately think of the thirty year fixed but the fact is very few home owners keep the same mortgage for that length of time-- a lot of people are simply overbuying.

Q: By Overbuying You Mean?

A: The average mortgage length is about seven and a half years. Many couples moving into a starter home will have children in the next three to five years and will look to move up to a larger home. Rather than overbuying with a thirty year mortgage, there's always the option of applying for an adjustable loan that stays fixed the first three, five or seven years. These loans generally offer a lower interest rate and, for those who can't sleep at night worrying that the rate will eventually go up, the loan can always be refinanced.