Housebuying: Mortgage application

This house stuff is moving rapidly, and it's also taking a lot of work. I want to blog about every step of the process to refer to a friend in the future or to personally look back upon. I'm trying to keep up.

Once my bid was accepted, I needed to get moving with a bank. My settlement schedule is based on a 45 day timeline, so I don't have much downtime at any point of this process. I am working with two different mortgage bankers because I want them to be competitive with each other. Before looking for a house, I contacted both of them to get a pre-approval, which was a pretty easy process. Now I need to get the more difficult, and serious, commitment to lend.

I spent some time yesterday giving all of my details to the two different lenders. Here are some things I am learning: When talking about interest rates, they have to be at zero points to compare them. I don't want to explain the whole idea, but I was quoted 5.375 at 1.5 points or 5.5 at zero points. Essentially, when you calculate it, the 5.375 becomes and is equal to 6.0 at zero points. So the 5.5 rate is much better.

Again, credit score is so important. I might not qualify for the type of mortgage that I want. Not becuase I have "bad" credit, but just because I don't have enough good credit. Seriously, if you are reading this and don't have a credit card in your name, go get one and start using it. Pay the balance in full and on time, and don't charge more the 50% of the total limit. I'll even help you find a good card. Seriously.

The actual mortgage application was pretty easy, both lenders walked me through it. Now I am waiting to for them to evaluate everything and get back to me. Becuase of the current economy, underwriting guidelines have become important to my situation. Most mortgages are sold and do not stay with the intial lender for the lifetime of the loan (30 years in my case). To sell a loan, it has to meet Fannie Mae and Freddie Mac underwriting guidelines, which have become strigent in the last few months. In the end, I am going to get a much better deal from a bank that is not going to try and sell my mortgage right away. TD Bank seems to be willing to do that. The reason this makes such a difference is because if they decide to underwrite it in a few years, my credit will be much better and more established, making mortgage easy to conform to the guidelines. Currently, if my mortgage was underwriten, I would be offered 6% at zero points, which isn't very competitive.

All of the above is based on my understanding, and may be inacurate. It might not even be coherent. But that's where I am. Waiting to hear back from the banks. Next step is my home inspection. Because banks will not lend me money if I'm not investing in a good house.