Advice for first time homebuyer? Cheapest mortgages?

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zeal
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Advice for first time homebuyer? Cheapest mortgages?

Post by zeal »

I have a friend who will be buying his first house. Is there a general consensus best/cheapest mortgage rates hub? When I bought my houses, I always just went with one of the lenders my real estate agent recommended.

Also, any advice you could recommend for him? He plans to buy this year and his fiance will be moving in once they get married (end of year, probably). His plan is to find a 3BR/2BA starter home to build up some equity and learn the ropes of homeownership together. He is thinking of going with the 3.5% down FHA loan so he can keep some cash for saving and investing.
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midareff
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Re: Advice for first time homebuyer? Cheapest mortgages?

Post by midareff »

I think there are rates much cheaper than that available lately. Just shared info for a friend who was interested in a refi that PenFed was offering VA 2.75% 30 year. I think that was no points as well. Check it out.
BarbBrooklyn
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Re: Advice for first time homebuyer? Cheapest mortgages?

Post by BarbBrooklyn »

I think that's a 3.5% down, not an interest rate, right?

I usually start by checking Bankrate for an overview of mortgage rates.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."
rooms222
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Re: Advice for first time homebuyer? Cheapest mortgages?

Post by rooms222 »

Having had an FHA loan for about 12 years now, it has worked for me. I was able to do a no-money cost streamline refinance to lower the rate from 6.375 to 3.75 in 2013. The main reason to do it is if the housing costs of owning are significantly less than renting in the area they are in, I was upside down in my condo for about 10 years, but the lower costs made it worth it. Also, current FHA rules mean that they will pay MIP for the entire life of the loan if they put the normal 3.5% down.
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zeal
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Re: Advice for first time homebuyer? Cheapest mortgages?

Post by zeal »

Correct, that's 3.5% down payment, not interest rate. I'll tell him to look at PenFed & Bankrate. I got my first mortgage via FHA loan in 2013 and it also worked out well for me--I'll share your story with him too, rooms.

Thanks all!
TheJoelfather
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Re: Advice for first time homebuyer? Cheapest mortgages?

Post by TheJoelfather »

zeal wrote: Sat May 09, 2020 5:22 am I have a friend who will be buying his first house. Is there a general consensus best/cheapest mortgage rates hub? When I bought my houses, I always just went with one of the lenders my real estate agent recommended.
I might recommend that he spend $60 to join Costco and use the mortgage comparison service that Costco provides. It might not be the absolute cheapest/best deal but it will likely be very competitive and then you don't have to try and filter through the shady brokers that might lead to a negative experience for a first-time borrower, like hidden lender fees.
Tiger85
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Re: Advice for first time homebuyer? Cheapest mortgages?

Post by Tiger85 »

Tell him to also check with 3-4 local banks and credit unions. They aren't going to be listed on bankrate.com, but often have very competitive rates.
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ResearchMed
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Re: Advice for first time homebuyer? Cheapest mortgages?

Post by ResearchMed »

Tiger85 wrote: Sat May 16, 2020 12:57 pm Tell him to also check with 3-4 local banks and credit unions. They aren't going to be listed on bankrate.com, but often have very competitive rates.
This is what we have done also.
It was worth the relatively small amount of time to call around and check several places (credit unions, banks, etc.), given that even a small rate difference would add up over many years.

RM
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Student2
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Re: Advice for first time homebuyer? Cheapest mortgages?

Post by Student2 »

Suggest to your friend that he spend some time at https://mtgprofessor.com/home.aspx. There is a lot of learning to be had there. I spent time after learning about the website from other BogleHeads and it was very helpful when I got my first mortgage. Pay special attention to what the Mortgage Professor likes to call "Upfront Mortgage lenders" who disclose all the fees associated with the mortgage up front, even before you enter into discussion with them. So you can see what the interest rates are for various mortgages, what the origination and other lender fees are, and what the points are. Those are the 3 factors that can be tweaked to generate profits for the lender, but the borrower seldom gets to know all 3 before starting an application. There are other upfront mortgage lenders (and upfront mortgage brokers) but one of them is https://www.aimloan.com/. I have dealt with them a few years now and you can search the forum for other Bogleheads with experience with their mortgages. I've been very happy with them and have had no complaints with their servicing of our mortgage.

I would also suggest that your friend compare no cost mortgages; that's a mortgage with 0 points. You can ask what the origination fees are or start an application to get this information, but it will also be reflected when you compare APY and APR. Looking only at mortgages with 0 points takes out the 3 factors lenders can manipulate down to 2. You can definitely opt to pay points, but the advice is to shop for the no cost mortgage. Once you find the best lender that way, then buy the mortgage you want with that lender.

Finally, when you look for a mortgage, look at 2-3 lenders and ask for costs on the same day. Mortgage rates change daily (or more) so you cannot compare rates obtained on different days. Credit pulls conducted this way do not add up in terms of the impact to your credit score.
Bogle_Bro
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Re: Advice for first time homebuyer? Cheapest mortgages?

Post by Bogle_Bro »

FHA loans are the most expensive loan type due to upfront mortgage insurance premium rolled into the loan & the fact you must refi out of the mortgage insurance once you have enough equity.

3% or 5% down conventional will cost much less because there is no upfront premium rolled in & the monthly premium drops off automatically when you have enough equity
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