How to ensure you get the very best mortgage rate and deal

I don’t know about you, but I’m a terrible juggler. Two balls, I can handle. But, give me three or more balls, and not just one or two - but all the balls - will end up on the floor.

I have the same problem when trying to make a decision that involves a number of different factors. I’ll quickly loose track of all the variables, end up making the decision on gut instinct, and then royally screw up the task at hand. That can happen to me when buying a new car.

• Quick Tips for Getting a Mortgage or Refinancing
• Using a Spreadsheet to Keep Mortgage Brokers Honest

And it can definitely happen to me, when I’m trying to find a mortgage or refinance my home. It seems like every bank or mortgage broker I talk to, confuses me more than the previous one. I end up getting all confused and embarrassed, and end up make a hasty decision that I regret for years - since a bad mortgage decision can be one of the costliest mistakes to make in one’s life.

So, to compensate for this tremendous shortcoming in my character, I’ve come up with a system and I’m now sharing it with you. It involves Microsoft Excel, so apologies to those of you who don’t use Excel or detest computers. You also need to make sure you have the “Analysis ToolPak” add-in installed for Excel, which is a free add-in on the office install disks. Microsoft has a brief tutorial on how to install the Analysis ToolPak. You do NOT need the Analysis ToolPak VBA add-in.

Don’t worry. Take a deep breath. If you can suffer through this, and learn the spreadsheet, you can save yourself a LOT of money. Even better, you’ll have a tool to keep everyone honest and to help with negotiations. For example, I’ve used this spreadsheet to review my closing documents, only to find the closing documents were in error. You cannot imagine how amazed your mortgage broker will be, when you correct his or her numbers! At any rate, I’m going to walk you through the entire spreadsheet and help you understand how to add numbers to it and compare not just the mortgage rates, but closing costs, points, etc, to determine what is the very best mortgage for you!

Quick Tips on Getting a Mortgage or Refinancing

Okay, first some quick tips. Then, I’ll give you my recommended steps.

• Mortgage brokers almost will never give you the best deal. They know this, so will talk about “service” and “not leaving you when the loan is done.” That’s all a bunch of BS. At the end of the day, you want to pay the least amount of money. Even $100 per month can go a long way to upgrading your cable service, paying for a better car, etc. Don’t give your money away!
• Some of the best rates I’ve found are at eloan. They are a reputable company and the last 4 of my mortgages were through them.
• Do your research! A great place to search for rates is Mortgage-X.
• Don’t forget to check with your bank - yes, the one you have your checking account with - as they may have competitive rates for existing customers.
• Believe it or not, it’s okay to pay points. Points buy down the long-term cost of the loan. If you believe you will not refinance for at least three years, points are an excellent way to save money in the long-run. Make sure you look at a few mortgages with points, and see how they compare. Points are also great for lowering the monthly rate (because you have a lower interest rate).
• It’s sometimes difficult to get all the closing costs, and different companies and brokers will throw different numbers at you. At the end of the day, they all have to put those numbers on a HUD. Do NOT agree to do a deal, until you’ve seen the HUD and you’ve plugged the numbers into the spreadsheet.

Using a Mortgage Spreadsheet to Keep Mortgage Brokers Honest

On to Larry’s recommended steps for obtaining the very best mortgage rate and deal you can:

1. Download my Mortgage Analysis Spreadsheet. (It’s virus free, promise!)
2. Shop for a mortgage rate, like you would normally do. Talk to people. Find a mortgage broker you can trust.
3. Do you have a rate and mortgage in mind? Get a HUD, and put in the details of that mortgage in the “Baseline” of the spreadsheet.
4. Go to eloan.com and see what sort of mortgage you can obtain from them.
5. Whatever type of loan you’re considering, i.e. 30-year, consider ARM and fixed. Consider each with some points. Put them all in the spreadsheet.
6. Now ask yourself, “How long do I think I’ll go, before I will refinance?” Let’s say you say 6 years. Then, look at the spreadsheet and compare the 6-year outlook. Which of the loans will save you the greatest amount of money? Look at the “P+I” column, which represents your monthly payment (not including any escrow payments you might have to make). Can you afford the mortgage?
7. The chance is very great that the best loan for you is an online company you’ve found, like eloan. Take that data into your local outfit, whether mortgage broker or bank, and give them an opportunity to match. They have many tools at their disposal, and you might be surprised at what they can do - if they really want your business.
8. If you do get your local outfit to give you a better deal, get a HUD and put the information in the spreadsheet to keep them honest and make sure it’s the best decision for you.
9. Finally, make a decision and lock in a rate. Close your mortgage as you normally would. However, make sure you keep your spreadsheet and data handy, because you’ll want to us it to verify your closing documents and final HUD. Don’t let anyone change the numbers on you. Steadfastly stick to the data in the spreadsheet. It will never steer you wrong.

If you follow the steps above, you will save yourself hundreds of dollars EACH AND EVERY MONTH, and you will save yourself a hundred-thousand dollars over the lifetime of the loan (depending on the loan amount, of course).

The pictures above are snapshots of the spreadsheet (If you click on those snapshots, a larger picture display so you can really get a look at the spreadsheet). Each row represents a loan. I’ve inserted 6 example loans, so you can see how this works. The empty cells are where you put your fresh information in. There are two main areas for each loan. The first area (represented by pink and blue cells) are where you put the loan information in. Pink represents required information, while blue is optional information. The second area (represented by white cells) are the areas where the spreadsheet works its magic: It calculates all the principle, payment and interest information. The most important area is under “Total Savings in the Given Year.” If I didn’t think I will refinance again until 6 years from now, I would want to know “If I go with loan X, will I save money or loose money in 6 years?”

The way I answer this, is find my “baseline” loan (you know, the loan I would probably do because I’m completely lost and confused, and think it “feels good” and I’m anxious to just make a decision and move on with my life). I put that “baseline” loan information on the line that says “Baseline Loan”. Now, I look at the information presented for the other loans that I’ve researched. I look to see how much money I would save - or loose - if I go with a loan other than the baseline.

To be crystal clear: The loan that has positive (i.e. black) numbers in the “6 Year Savings” column, that loan is better than my baseline loan (remember that I was using 6 years as an example - if you think you’ll move in 4 years, use that column). Likewise, if the loan I’m comparing to baseline has negative (i.e. red) numbers in the “6 Year Savings” column, that loan will leave me in a worse-off position than my baseline loan.

So, again, take a deep breath and plunge in. Use the examples I’ve included as a guide. If you do it right, this spreadsheet will tell you your closing cost, monthly payments and interest expense to the penny. Good luck!