The Mortgage Process: How We Found the Right Lender for Our New Home Purchase

We recently purchased a new home…a brand new town home. We made the offer last December knowing the home wouldn’t be built until fall of 2007 (town homes have to be built out in rows, so they can’t just build it as soon as you buy it). We closed in late September of 2007. Like most, we couldn’t pay for it all ourselves, so we needed a lender for a portion of the costs.

The Application Process

The builder of our home had a lending company so we entertained their offers. Applying with the builder’s lender (DHI) was easy. They had me apply when we made the offer and settled on a price for the house. Over the next 9 months we got fully approved and bombarded them with questions and requests for good faith estimates. Imagine following mortgage interest rates from December 2006 to September 2007. I was a wreck by close from all the money I knew I’d lost (due to rates moving up).

Also, we bank with Bank of America so I thought I would check to see what kind of offer they could make. To sign up with Bank of America I simply called up my local branch (around mid August) and expressed interest in the No Fee Mortgage. Since it was a new build I was transferred to someone in California who handled the process from there (apparently new build loans are handled away from the local branches). I forget what all I gave them, but it was enough to receive full credit approval and get a good faith estimate. A week or so later I received a application disclosure package in the mail. I didn’t go much further with Bank of America once I saw the numbers.

In addition to these two lenders I checked mortgage rates with maybe 5 others who’s good faith estimate’s didn’t warrant any further discussion.

Deciding on a Lender

We decided we needed a 30 year fixed rate and were going to put 20% down. Ultimately it came down to a better value.

DHI offered the following: Closing costs of $5,498 (including $412 to buy the rate down .25% Points); $5,000 towards closing costs (incentive for going with the builder’s lender); and a rate of 6.375%
While Bank of America offered: $0 Closing Costs. …well, almost. I’d just need to pay a whopping $3,731 to get the loan down 2.141% points to 6.375%

In my estimation DHI was a better deal by $3,233 (3,731-498). Alright you Mortgage Experts, am I wrong about this calculation or the assertion that this was the better deal?

By the way, Bank of America must have considered DHI’s offer a better deal because they gave me $250 just for trying them.

Closing the Deal

We then proceeded to the closing with DHI. This was a quick and painless process in my opinion. We had our Realtor there to help us with any questions, so it went smooth. Took about one hour once we got going.

If you are looking for new purchase or refinance rates, be sure to check out my new mortgage rates table page.

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Yes, I only had to pay $498. Nice. But in my opinion, $5,498 for closing costs on a $200k home is very high. Originally, the builder marketed the deal to me with the $5,000 to be used wherever I wanted (on the cc, on the price of the home, ect...) At that time I thought, there's no way there using all 5k for the cc. But, they came pretty close. I was a little peeved at first. I wish they'd of just said they'd cover the cc no matter what they were. I swear, you can't purchase anything large (wedding, car, house) without dealing with a bunch of BS like this. I'm glad it's over.

Yes, they must have determined that it was the better value. I'm suprised they didn't try to directly compete. I think they saw that I had $5000 off with the other lender and just threw a give up number out there to call what they thought was a bluff.

Thanks for all your valuable comments.

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mortgage-info.com

So if I read your post carefully, you only paid $498 dollars out of pocket for the loan with DHI?

$5,498 closing costs -$5,000 credit = $498?

If so, then yes a better deal with DHI.

But if you paid $5,498 w/ DHI and BofA was offering $3,731 - then BofA would have been better for a few reasons.

A - Points are tax deductible.
B - Obviously, fees were less.

BofA must have thought it was a better value or else then would not have sent the check, right?

Inside Tip: DHI was probably able to offer you a better deal for this simple reason. If you purchased the home directly from the builder, they actually saved money having no need to pay a 2-5% co-broker fee to a real estate agent. (if you want to check, call the builder asking if you can bring your agent to represent you. If they say yes, then they have the real estate commission built in.) Therefore they past some of the fee’s back to you as an incentive but it’s really built into their price.

What I find more interesting is that the "terms" you expected based on advertising vs. the terms offered. As you indicated, you were expecting $0 fee's but instead these fee's were masked in the form of discount points.

It's interesting to think how many people would have applied with BofA with the same expectation as you due to unclear advertising claims. Note how difficult it was to find the “terms” of directly from the BofA site.

I have followed this for some time starting with this Inman blog post ( http://blog.inman.com/inmanblog/2007/05/loss_leade... ) and did a post regarding this exact issue regarding expectation...

http://www.mortgage-info.com/blog/2007/12/example-...

Maybe your blog post here ( http://blog.inman.com/inmanblog/2007/10/bofas-no-f... ) regarding the missing refund help get you your refund?

Congratulations.