Real Estate Agent Commission – This is a true buyers market, virtually everything is in the buyers favor at this time. The standard realtor commission used to be 6%, this was an industry standard that held true for many years but the market has changed and it’s entirely up to you to negotiate the best deal possible for yourself. A lot of people are uncomfortable with the whole negotiating process but it is not considered rude or inconsiderate but rather just part of the normal procedure. If you have hired a professional realtor, they will not be offended if you ask if they are willing to accept a lower commission. In this market, real estate agents are competing heavily and if you are a qualified buyer, I almost guarantee you’ll be able to find a realtor who will accept a lower commission.

House Price – This is an obvious one but it needs to be touched on. In this market, cash is king and you can scoop up some real estate deals if you bide your time and do your research. Before making an offer on a house find out how long the house has been on the market, what are comparables going for, what did the house sell for originally, and has the price been recently reduced. The longer the house has been on the market, the more desperate the seller is to sell. But, be cautious and also consider that the reason the house hasn’t sold is because the owner has set an unrealistic sale price. A realtor will be able to advise you on these points. I heard it said once that when you make an offer on a house, if your not a little bit embarrassed that your offer is too low then you offered too much. I think this is true. Go low; it’s not your problem if the home owner is insulted, you’re trying to get the best deal possible for you and your family.

Loan Origination Fees – Loan officers who work in banks and other lending institutions like credit unions are usually paid by commission. In some instances they may be paid only straight commission with no salary and the loan origination fees you pay are their salary. The loan origination fees are typically 1% of the sale price and the loan officers gets a percentage of that, about 40% – 70% with the bank keeping the rest. In some cases, they work on a tiered scale where if they close a certain amount of loans they would go up to a higher level and then get a larger percentage of the loan origination fee. In cases like this, if the loan officer is short on loans, it is in their best interest to work with you so that they can get up to the higher level for the month or quarter and then they would make money anyway.

Home Appraisal – When buying an older home, a home appraisal or inspection is often required and should definitely be requested by you the home buyer. This is usually a smaller fee but it may be negotiable.

Traditional Banks or Credit Unions

For most borrowers, a bank or credit union is going to be the best choice for traditional loans. It’s a good idea to shop around for a mortgage, go to two or three different banks to what types of loans are available and who is offer the best interest rates. In some cases, your personal bank may be the best option for a loan, they want to keep you as a long term customer and they know the current market conditions where you live.

Pros

With a large brand bank, you get the peace of mind of dealing with a known entity. Of course, in today’s markets this is looking a lot less as a positive. But, in most cases dealing with a major lender versus an online lender does give a bit of security.

Some major lenders can also originate mortgage loans at no expense because they know they can make money in other ways such as with banking accounts or credit card services. If they can grab your mortgage loan business, they feel that you’ll make them money some other way down the road.

 Cons

At traditional banks, you need to be wary of inexperienced loan officers who can foul up the loan process, ask for someone with more experience if you have any concerns about the quality of help you are receiving. Also be aware that loan officers are paid in a variety of ways to process loans, some are paid commission and some are paid salary plus a bonus for each loan they originate. It’s best to be aware of how the process works so that you can avoid the traps.

Most major lenders have also begun to tighten their lending standards so that if you need a “jumbo” loan, you may need to pursue other mortgage loan options. A jumbo loan is a loan that is generally higher than the national average; currently anything over $417,000 is considered a jumbo loan except in Alaska, Hawaii, Guam, and the U.S. Virgin Islands where anything over $625,000 is considered “jumbo”.

Another downside to traditional lenders is that they don’t have a lot of leeway in loan financing terms, the fees and interest rates are fairly set.

Online Mortgage Shopping

 This is a relatively fast and easy way to shop around for a mortgage. The online sites usually work as a referral service so eventually you will end up working with an additional bank or mortgage broker.

 Pros

Since it’s all online, you can get obtain a bunch of rates fairly quickly and conveniently. It’s also a good way to see what kind of mortgage you would currently qualify for so that you have a starting point for your shopping around.

Cons

Be careful of giving your social security number out to too many of these services as they may actually be pulling up your credit report. This isn’t necessarily a bad thing, but you need to be aware that having your credit report pulled too many times can negatively impact your credit, it makes it seem like you’re trying to over extend yourself financially. So, when you shop for a mortgage, you should do it in a compressed time frame like over two months so that it is obvious you are shopping around for only one loan and then your credit won’t be dinged.

Use a Mortgage Broker

For people that need “jumbo” loans, their options are much more limited, so a mortgage broker may be a necessity.

Pros

Because you’re dealing with an individual or a smaller firm, you get more personalized attention. The more unconventional your loan needs, the less likely it is that a main stream lending institution will be able to get you financing and it is for exactly these circumstances that a mortgage broker is needed.

Cons

You need to be aware of any fees that a mortgage broker charges. In some cases, they work on a straight fee basis and this is usually a buyers best bet. Originating and processing mortgage loans involves a lot of fees and an unwitting buyer could end up not getting the best deal possible because not all mortgage broker fees are easily understood by the buying public.