I have been out of the lending game for a while now, but you should never have to pay an agent or lender to get rates or even a pre-approval. If someone asks you for money, just say thanks but no thanks.

Theoretically speaking, banks look for your mortgage payment to be no more than 28-32% of your gross income. There's another calculation which includes total debt (law school loans might provide a more substantial debt load in your case), but that can vary from lender to lender.

I have no experience with actually buying a home myself (I made an offer on a co-op once!), but I was a mortgage lender for three years. I'm happy to answer any questions I can.

Thanks, Eid. So another mortgage consultant might be able to get me a lower interest rate, right? So I should call around a little?

The way it has worked for me so far:
1) i submitted an application to lending tree. the offers weren't the best, but it gave me an idea of what amount I could get a loan for
2) resarch, using google's real estate search and the local MLS website properties that were asking less than that loan amount
3) I got a lead to talk to a local bank which gave good rates and does their own servicing (although they do sell the loan), and put in an application. The loan officer then gave me a letter that said I was pre-approved for $X.
4) call a realtor that was recommended by a couple co-workers, and tell them what I'm looking for.
3) Look at some houses
4) Make an offer and get accepted
5) talk to the loan officer again, because the actual approval is based on what you are paying for the house, and some other stuff
7) close next week.

I totally recommend the book "Home Buying for Dummies".

I actually have that book, but I read it a long time ago. I need to re-read it.

Definitely ask around. It's a negotiation. If you get a better rate, take that back to your original lender. They may not match the rate, but they may waive some of the closing costs (though unless you're really strapped for cash, that's usually a losing battle on a 30-year loan). Most lenders have a bit of discretionary pricing, though. Depending on how hard up they are for loans right now, they may be willing to fight for your business.

Re. the question I missed in your original post: Most pre-approvals are only good for 45-90 days. Each lender is different; the pre-approval letter should state how long it's good for.

BtW, congratulations. This is one of the most fun, stressful, and rewarding things you can do.

Ugh, I forgot closing costs. I can't afford this. And I know I have no right to be mad, because it's their money to do with what they want, but I just found out that my parents pay $30,000 a year for the three cruises they take each year. I am an only child. I am paying back $120k in law school loans. They can't freaking take one less cruise for one year and give me that money so I can buy a house? Like I said, their money, their business. But I'm tired of them expecting me to get excited over the floaty pen they bring me back as a souvenir.

you can ask the sellers to pay the closing costs / roll them into the price of the loan.

Another question, Eid (and thank you again by the way): I thought that the rates change daily... So is there any point is asking around to other lenders now if I am not ready to buy today? Or is there some small fee to lock in the rate?

I do not have experience buying a house, but when dealing with people who have money you want, all I can say is this: GET EVERYTHING IN WRITING. Do not trust ANYTHING they say on the phone or in person unless it is WRITTEN DOWN, preferably in their own blood with photographs and fingerprints. I would completely forget about your July pre-approval unless you have something IN WRITING that says "this is good until ______ " Also I am finding out the hard way that pre-approval means basically nothing UNTIL YOU HAVE IT IN WRITING. I dunno if this applies to mortgages, actually. I'm just a teensy bit upset right now. I think my advice still holds, though.

/me logs off to go smash things

desjardins, I'm right with you smashing things, I have figured out that I just can't afford the place I want. Oh well.

Another question, Eid (and thank you again by the way): I thought that the rates change daily... So is there any point is asking around to other lenders now if I am not ready to buy today? Or is there some small fee to lock in the rate?

Get pre-approved. Shop for a place. Once you've got the place in mind (and have made an offer), start shopping for a firm rate. Most places are only going to differ an eighth or a quarter of a percent. But things you can bargain for at that point are free rate locks. In my day (seller's market), some borrowers rolled closing costs in to the loan amount (which the banks love, because you're paying interest on another few thousand dollars for 30 years). As desjardins said, this is a buyer's market and you may be able to get them to cover closing costs.

As far as *when* to lock, well. That's a science. Back in my day (and much has changed with the financial markets), we used to look at the treasury prices for the day (90-day T-bills, I think). A drop in the treasury prices usually indicated a rise rates the next day, and vice versa. A good mortgage broker or loan officer will offer suggestions on when to lock or not (though I always reminded my customers that the responsibility and decision was wholly theirs). But I think you're really just asking when in the process to lock, and that's once you've made an offer, have the application in or are submitting it.

And don't worry about your parents. You'll feel better about managing this on your own once all is said and done. You're totally capable of handling things. You got this. =)

As desjardins said, this is a buyer's market and you may be able to get them to cover closing costs.

Do over. It was agentcorvid who said it, and "them" is the sellers.

I always used to get really excited with my clients about this stuff. "Go get 'em!" I wished I was there with them through the whole process, not just my end of things. I guess I got excited again and messed up my comment. ^_^

My husband and I just bought a house this summer, our first.

There's pre-qualification and pre-approval, and they are different things. A pre-qual is pretty informal and just based on some basic information and your credit situation. A pre-approval requires filling out the mortgage application. With a pre-approval in place, as we made offers on houses, our mortgage guy would write us a letter that said "misskaz and mrkaz are pre-approved for a loan on the property at xxx address based on the information provided to xxx lender". He said some mortgage guys give you a letter that says you're approved up to whatever amount, but he didn't like to do that because it took away some of your bargaining power to give the sellers information like that. But it's up to you. Sometimes we included the pre-approval letter with the offer if it was a competitive bidding situation, and other times we waited to get the seller's response first. Unfortunately we made several offers on houses before we got ours, so I know more than I'd like to about it all.

Once we finally had a house under contract and started moving towards closing, we filled out even more paperwork for the loan people to take the loan to underwriting and get fully funded.

About the gift thing with your parents, nowadays gift money is looked at *really* closely to make sure it's not some shady kickback or loan disguised as a gift so should that opportunity ever arise, know that there's extra paperwork involved. A colleague of mine got a small gift of $3k from his mom and he says he wished he hadn't taken it or just had her wait until they closed so he could use it for repairs instead, for all the hassle it caused. Not sure if it helps cushion the blow to know that or not.

Closing costs a lot of money. Even with the minimum downpayment on an FHA loan (3.5%) and the sellers kicking in some money b/c of inspection issues, it surprised me how much it all cost. We had originally planned to put more down but at the last minute decided to do the minimum to keep more cash liquid, and that ended up being a good idea. Our roof leaked on the second night in the house and we had to do a complete tear off and replacement. So depending on what kind of property you're looking at (condo vs single-family, fixer-upper vs new construction), always always have more money socked away than you think you need. We managed to get through it all, including expected and unexpected repairs, without having to use our credit card but it wiped out our savings.

Oh, and about locking in rates. We decided we had enough things to stress about that we weren't going to play the timing game on mortgage rates. We locked in at 5%, and sure we could probably have gotten 4.75 if we had waited. And now they're even lower. But the way we thought about it was that even at 5%, rates were at near-historic lows and made home buying totally affordable for us. If at some point we decide to refinance, we can, but it just wasn't worth trying to play that game. Others may disagree, and that's fine too.

amro:

don't feel bad, any mortgage is basically involved with negotiating large sums of cash, something that, by definition, the bulk of the populace tends to be leery and uncomfortable with. At the core, negotiating IS conflict, and if you're conflict-averse by nature, then negotiation will (rightly so) probably make you pretty anxious.

Dunno if it helps, but you can maybe think of it as sort of the civilised, first world denizen's version of the classic Discovery Channel scenario where some vicious wild hyenas are doing battle over a fresh juicy kill on the African veldt. Everyone usually (eventually) winds up getting their own chunk of the prize, but before that happens there's a good deal of snarling and posturing, as well as random gore, ugliness and blood loss along the way.

The mutant bastards who do actually enjoy this sort of thing (sorry, Eideteker, if it helps, I think I'm becoming one as well) tend to work in jobs as car salesmen, realtors, mortgage lenders and lawyers; aka fields where skills at negotiation (read: ritualised fighting whilst dressed up in a spiffy navy blue suit) are highly prized. As such, you should respect them, but keep in mind that in such negotiations, you are a tender morsel surrounded by long, sharp pointy teeth. Knowledge does indeed make a nice stout stick to beat them with, but an even better one is cultivating some fangs and claws on your own behalf.

all of that by which I mean: if you plan any sort of large purchase, you really should learn the basics of how to negotiate, even if (actually, especially so if) you utterly loathe doing so.

Ha, lfr, while I agree wholeheartedly with your comment, it made me laugh because I am one of those mutant bastards. I am a lawyer and I negotiate for a living. I am not so much a tender morsel as a morsel lacking knowledge about how to buy a house!

About the gift thing with your parents, nowadays gift money is looked at *really* closely to make sure it's not some shady kickback or loan disguised as a gift so should that opportunity ever arise, know that there's extra paperwork involved.

Hmm, I wonder if this varies by state... I am pretty sure that in NJ a gift of $13,500.00 from each parent is allowed without consequence.

nowadays gift money is looked at *really* closely to make sure it's not some shady kickback or loan disguised as a gift so should that opportunity ever arise, know that there's extra paperwork involved.

not to mention an astonishing amount of tax bureaucrasy. And that completely ignores the emotional / sociological baggage that "free money from relatives" can, and sadly all too often does, incur. Anecdata: Friend got a "gift" of a nice fat $50K down payment from a grandparent for their starter home, who then took it upon themselves to assert their authority on where said house would be located, what improvements could/could not be done, et cetera.

so there is that.

upon review: HA! Well there you are then. If it makes you feel better, my beloved Boss is very un-mutant-bastard-like (corporate in-house attorney) until such time as you corner him on something where he feels like he's getting the short end.

Full disclosure: I have baggage. I am still smarting from having to negotiate with an used car salesmen yesterday during a hopeless scenario in which the mister (a tender morsel if I ever saw one) happened to be the party with the cash in hand (alas, I have zero credit GEE THANKS O EVIL BASTARD X) but *I* happened to be the armed negotiator. At the end of the day, I wasn't sure which one I wanted to hit with a bigger stick... the mister or the car salesman :P

If it makes you feel better, my beloved Boss is very un-mutant-bastard-like (corporate in-house attorney)

Yeah, we are generally fairly decent people. :)

The mutant bastards who do actually enjoy this sort of thing (sorry, Eideteker, if it helps, I think I'm becoming one as well)

No worries. I'm in a totally different field now (thank cheesus), and I always used my powers for goodness and niceness. I have several heart-melting loan stories where I was able to change people's lives with a little extra effort. But that's probably a subject for another thread (or, you know, a meetup).

I like to think I was the sort of mutant shark you *wanted* to have, since I was totally on the client's side (unless they were jerks). Anyway, done taking over amro's thread.

You'd be at an advantage while house shopping to have the loan approval in hand; it generally cuts down the closing time because a bunch of the bureaucracy is already done. Once we were totally serious about buying, ikkyu2 and I got the loan first (which helped us figure out what price range we should be looking at), and then looked at houses to buy. (And our mortgage broker did make sure that the pre-approval letter we gave to the sellers listed the accepted offer price of the house, not the total approved loan amount.)

There was another buyer bidding on the same house, and us having our loan in place made us look like more serious prospects. I mean, it's all well and good to say that you want a house and the bank said they'd probably help you pay for it, but it's much more reassuring to a seller to have actual binding paperwork from a bank with the actual dollar amount for the loan.

I also liked feeling like the scary anxiety-provoking part of the house-buying process was already done by the time we made an offer, because then we just had to bite our nails about the sellers' decision rather than having to worry both about whether the sellers would accept our offer *and* whether the bank would even fund it if it was accepted.

I have a mortgage broker who always gets me a good rate. (they get their fee on the other end)

Also also: Ikkyu2 did most of the pre-qualification stuff beforehand without me, so I don't have a great sense of what happened, but it kind of seemed like banks were telling him he could qualify for all sorts of huge loans -- but when we actually looked at how much banks were realistically willing to loan in this economic climate and with all the various new regulations about proving income, etc. for mortgages, that number came way down. In other words, our credit scores qualified us for loans that banks weren't willing to make, so having a pre-qualification number was a bit pointless.

This may have been a local phenomenon; we got the impression that some of the bank mortgage consultants didn't really have much of a clue (though we loved the woman we ended up working with). But it's something else to throw out there.

Seconding the mortgage broker idea. They have no dog in the fight with regard to which loan you take (i.e. they're not trying to sell you something). Ours, when we bought our first house, was totally amazing - completely demystified the whole process and made sure we were 100% informed and comfortable with each step in the process.