My wife and I are in the early-ish phase of buying a home. We have a realtor, got a couple pre-approval letters (one from our bank, one from a direct lender), and have started visiting houses.
Our realtor recommends we get a loan-commitment letter as it’ll ostensibly front-load some of the escrow-phase paperwork and also make us more attractive to sellers.
While I like those aspects of it, I worry that it rushes us past the rate-shopping phase and the potential for a lower rate. (FWIW, the offer from our bank, which was the lower of the two, was for 3.625%, an estimated APR of 3.737%.)
Is the commitment letter worth it, or should we take it a little slower?
I’m in commercial real estate, not residential, but from what I’ve seen if it’s a very competitive local house market with multiple buyers going after desirable houses whatever you can bring to the table to remove impediments is useful, especially for sellers that absolutely have to be sure the deal is going to happen. In competitive scenarios sellers will often take a bit less money if the deal is more assured so you could actually be saving money.
If that’s not your market there’s really no point to locking yourself in.
In my real estate days, we definitely recommended buyers get a mortgage loan commitment letter before submitting an offer on the house. It showed you qualified for the loan and that you were serious about buying a house.
Thanks for the input, all. I’m trying to learn everything at once, and it’s good to have some perspective.
Which brings me to follow-up questions.
Realtor.com says that the median age of Los Angeles’ housing inventory is 41 days (if there’s a more geographically granular report, I couldn’t find it). Is that a “hot market” in the “faster is better” sense?
Also, as far as rate shopping goes, would I hit up a bunch of lenders now, and go through the whole routine now, or just stick with the offers I’ve got?
Quick note on that rate: That’s actually from our bank, who “only” gave us a pre-qualification and not a pre-approval. Right now, I’m planning to ask the direct lender who gave us the pre-approval if she can match it.
As for points, the direct lender only gave us the par rate and said we’d discuss points when we’re farther along. (Maybe once we have a contract with the seller in hand?)
When the time comes, we’ll look at what point arrangements make sense for us. There are job and personal considerations that may result in us moving after just a few years, so we probably won’t do more than a point, if that.
Why do you ask? (Because, seriously, I don’t have the firmest grasp on the concept of the whole point system quite yet.)