Getting My First Home Mortgage Comments53 Comments

As some of you may recall, my girlfriend and I are in the midst of purchasing our first home. Previously I wrote about the importance of a good realtor and the benefits of quality home inspection.

Our home buying story wouldn’t be complete without telling you about how our mortgage process went.

Despite how others have warned about various hassles of buying a home, I have to say it’s gone incredibly smooth so far. Besides the initial minor problems with the other realtors we tried, there have been virtually no problems. That says a lot about the realtor that we were lucky enough to work with – he was a true professional. Getting the mortgage may have been the only difficult part.

It’s not that the bank wasn’t willing to lend me enough money to buy a home. No they were quite willing to lend me about 50% more than we needed. Getting the interest rate I wanted was another story.

When I had first started looking into buying my first home last year my lousy realtor convinced me that using a mortgage broker was the best route to take. It seemed to make sense since he would compare rates from different lenders to get me the best deal. Later I realized that the realtor was just trying to get some extra commission through the referral.

So I went ahead and got my mortgage pre-approval through the mortgage broker that the realtor recommended. He seemed pretty helpful early on, answering all my questions and getting me pre-approved for a decent sized mortgage. If I had gone ahead with that original realtor I probably would have ended up applying for my actual mortgage with this guy.

At the time his rate didn’t sound too bad and I was stoked to get pre-approved for so much. Somehow I bought his line about him not charging me anything for his services. Obviously someone’s paying him though. If it’s not going to be me, it’s going to be the lender. Of course they would factor that into the rate they offer him.

I eventually started looking at condos again this year and got another pre-approval through this guy, but the rate still wasn’t what I had hoped for. With all the talk of rock bottom rates out there, I wanted in on that and I felt my credit history was fairly strong. I figured at least the pre-approval was the green light to shop for a condo.

Once we had an accepted offer on the condo we wanted it was time to really get down to business with our home mortgage. Knowing how much I was pre-approved for and what other banks had been advertising, I went in to talk with someone at the bank that I normally deal with. Going with my current bank just seemed like a good idea considering it would make payments easier and they might be more likely to treat me better.

Like any mortgage specialist would do, she did try to sell me on a higher rate that she could actually get me. I don’t blame her since her job is ultimately to make the bank more money. On a side note I did resent how aggressive she was trying to sell me on getting life and disability insurance.

Out of curiosity I got in touch with the mortgage broker to see if he could beat the rate I was offered. That’s when he started putting on the pressure. He insisted he could get a better rate and went on to try to put down my bank. In all honesty I was quite turned off by his approach, especially since he offered me a much higher rate himself earlier. Sure I want the best possible rate, but I could see right through the way he was bashing my bank.

Instead of actually telling me what interest rate he could get me, he tried using a tactic of insisting that I’d have to commit to doing business with him first. Basically he was trying to tempt me while refusing to get into any kind of bidding war. Although I understood where he was coming from, I was quite reluctant to deal with someone who wouldn’t even tell me the rate he could get.

Rather than committing to working with someone that I didn’t particularly trust, I went back to my bank’s mortgage specialist with details of the broker’s offer. From there we went back and forth until we reached some numbers that sounded pretty good to me. In the end it was a much better deal than what the broker had pre-approved me for.

The kicker…when I sent the broker a courtesy ‘thanks but no thanks’ e-mail, he had the nerve to still bash the rate I locked in. The fact of the matter is if he had been willing to be more open, I probably still would’ve done business with him, despite his offsetting approach. I guess he was a little bitter after losing the deal.

The rate I got in the end is 2.7% on a 5 year variable mortgage. I realize that a fixed rate might’ve been safer, but as long as we keep an eye out for interest rate increases, we can ride out the low rates for a while. Then when they do go up a bit we can lock in 5 more years at that rate.

Overall I’m quite satisfied with the mortgage we got and really the process wasn’t too painful. It’s nice to have cleared one more hurdle towards owning our first home. Maybe I should’ve kept shopping around for an even better rate, but I doubt I would’ve got much lower.

How did your last mortgage negotiations go? Do you have any tips for getting a good deal on a home mortgage?

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This entry was posted in Financial Advice, Real Estate, and tagged , Comments53 Comments
By : Jeremy Biberdorf | 23 Apr 2013
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53 thoughts on “Getting My First Home Mortgage

  1. Daisy @ Young Finances

    When we got our mortgage, the bank was super shady and the person there really turned me off so we shopped around. I know people get commissions and stuff, so it can make it a swarmy industry. You got a great rate, just keep an eye on the interest rates!

    Reply
    1. Jeremy

      Yeah when there’s so much money up for grabs with commission on a mortgage there are bound to be some shady people. Sometimes you just have to go with the one who you have a little less lack of trust with. In my case I trusted my bank of the last 20 years more than some random finance company that the broker would’ve hooked me up with.

      Reply
  2. William @ Bite the Bullet

    Congratulations! When’s the house warming? ;)

    Hmmm… if you’re paying attention to the noises the various Fed officials are making, we probably have nor more than about a year or so before interest rates start edging up.

    Here’s the risk of a short variable note: when you need to refinance a few years from now, every mortgage company and broker you deal with will know you’re desperate to get that balloon paid, and it’ll be a lot harder to get a good deal. This happened to several friends of mine back in the nineties.

    In the past, when the reference rate (LIBOR, usually) molehilled up, captive mortgage holders found their rates mountaining up. When that happens, there’s no escape, other than refinancing into a fixed. And the fixed you get then is always worse than the fixed options available at the time of the original mortgage.

    On the other hand, if you plan to move in a few years, a short term variable is the most cost effective way to go. If a move is what you plan, here’s the breakdown on how best to do it: http://bit.ly/BFS-2

    Reply
    1. Jeremy

      Thanks for the advice William. The banks have been expecting interest rates to start rising for years now. So I’m not too concerned. The economy needs to improve before that happens. Didn’t the US interest rates just recently drop lower? I think when I do refinance I can still pressure them about the possibility to moving my mortgage elsewhere to get a good rate. There will always be someone who will out-price others to get my business.

      Reply
  3. John S @ Frugal Rules

    Wow, sorry to hear about that ordeal Jeremy. Speaking from my experience working in a bank, I know how pushy they can be and it becomes about the sale and not what’s best for the client. We shopped around for ours, but eventually went through someone that was referred to us by a couple of good friends. She was able to get us the best rate and put no pressure on us. It looks like you got a great rate, just keep an eye on those rates like you said.

    Reply
    1. Jeremy

      Well it wasn’t that much of an ordeal. I’m sure a lot of people getting a mortgage go through much worse. I am glad it is taken care of though with a decent rate. I might’ve been better off to ask around for a mortgage specialist recommendation.

      Reply
  4. Pauline

    That seems like a pretty good rate, what % is the down payment? I shopped around with brokers but eventually my regular bank got the best deal. The girl told me the rate was only if I took home insurance with them, then I read the fine prints, found out it wasn’t and had to fight to get the insurance premium back. They are tough!

    Reply
    1. Jeremy

      I put down about a 25% down payment. I was going to put more than that but figured I should keep a bit of a buffer for any surprise costs. Maybe we’ll even do some renovations early. I think my bank might’ve been more willing to give a good rate knowing I already had multiple accounts with them. It could’ve been tougher if going through a bank I don’t normally deal with.

      Reply
  5. Darnell Jackson

    Only thing I can tell you is two words:

    PAY CASH

    If you can’t do that then you can’t afford it.

    Wait until you sign that paper that says that over 30 years you actually pay like 3 or 4 times the price of your house.

    Your body looks at that and is like hold up this isn’t a good deal but you sign it anyway. You’ll find out later why you should have saved that down payment money and bought one of these auction properties for CASH. No mortgage = freedom.

    If you knew better you would do better.

    Reply
    1. Jeremy

      Sorry but that advice is a bit ridiculous for a home purchase. If people can only afford a home if they pay cash then the vast majority of people would not be able to afford a home. For me to save up the entire price for a home I’d pay so much on rent in the meantime that it would not be worthwhile. With the low interest rates I’d much rather put my cash into investments. You do not pay 3-4 times the price of your mortgage. I think you’re a little too caught up in your anti-debt stance Darnell.

      Reply
      1. catherine

        I totally agree with you. Mortgage debt is a totally different thing. Not only are we talking about 2.7% it’s an investment that will appreciate. Jeremy also bought in one of, if not the, the most expensive city in Canada. I have a friend who lives in Kansas and is looking at a beautiful 15yr old 3 BR ranch for 135k. 135 is tangible for some people to pay for in cash or at least 50+% down. These prices are non existent in most major Canadian cities. That same home, from what I’ve seen, would be at least double here in Halifax and probably 5x that in Vancouver.

        As per your post Jeremy: That’s a great rate. We went with a broker but he’s a friend of ours so could trust him. He worked hard to get us a good rate. We bought 3 years ago when rates were ”as low as they’d ever be” and sort of pushed into buying the home through scare tactics (not via our broker) that if we didn’t buy NOW rates we’re looking to increase as much as 1%/year…They wen’t in the opposite direction….oh well. We still have a pretty decent rate so I’m happy. I think anything below 5% is decent especially considering my moms 1st mortgage was 19%!

        Reply
        1. Jeremy

          That’s a good friend to have. I need to get one of those next time I’m looking to buy a home. I’m not surprised that they were warning you of impending interest rate increases. The banks have been expecting that for a while now. I agree that anything below 5% is pretty good. My stepdad told me about his 17% mortgage which is right up there with your mom’s first mortgage.

          I do wish I could get one of those 3 bedroom houses for a mere $135k. Things would be so much easier. But yeah, prices were are at least 5 times that and a lot more than that depending on which neighborhood.

          Reply
  6. Grayson @ Debt RoundUp

    When we got our first house, I didn’t know much. We had a mortgage broker and got a pretty good rate for the time. For the next house, I know that I will shop around for a better rate and will try to get others to bid against each other. That is the whole point isn’t it? Get the lowest rate that you can and lock it in.

    Reply
    1. Jeremy

      I guess I should’ve shopped around more but it seems like I was getting a good rate by just pitting the mortgage broker against my bank. If I had thought I could get it even lower I would have taken the time to get quotes from other banks too.

      Reply
    1. Jeremy

      Thanks Ogechi. It just seemed like I was getting a better rate if I took the risk of going variable. Some people may be predicting rates increasing in the next couple of years, but the economy will have to pick up first and I just don’t see that happening soon.

      Reply
  7. Cat

    I tried ING and the bank where my sister in law worked. They were about the same, so I went with the family bank. :)

    Reply
    1. Jeremy

      I think if you just contact banks without mentioning the other you will likely get the same rate. The trick is to get them bidding against each other. Thinking about it more, I should have got another bank or two competing for my business.

      Reply
  8. writing2reality

    Something I always ask myself, regardless of the situation, is “What’s in it for you?”

    After asking this question, it is pretty easy to determine those who are providing exceptional service, beyond a commission, and those pushing you just for a commission.

    Reply
    1. Jeremy

      Unfortunately in the mortgage industry the majority of them would be mostly interested in the commission. Maybe some are better at hiding that interest than others. I think if you do happen to find a mortgage specialist who genuinely cares you are really lucky.

      Reply
  9. American Debt Project

    Seems like Canada and the US are pretty different but for now I am pre-approved for the best rates at my bank which are still under 4%. Now I just need the cash so I can buy a place in this market :)

    Reply
    1. Jeremy

      Maybe you’d get better rates with a decent down payment. You don’t want to take on a mortgage without being able to pay a nice sized down payment anyway. That’s just going to add on way too much extra interest.

      Reply
  10. Jacob @ iHeartBudgets

    We went with a broker who was the wife of our Realtor, and though that might seem like a conflict of interest, they did treat us VERY well. I checked around a bit and the rates were decent, plus the sellers paid for all the fees :)

    We did go with a broker on our ReFi, but it was MUCH cheaper than usual because we did the FHA streamline.

    Reply
    1. Jeremy

      That couple must make quite the team. That’s one way to ensure they get a lot of referrals going each way. I wouldn’t really see it as much of a conflict of interest since they both benefit if you close the deal with them.

      Reply
      1. Jacob @ iHeartBudgets

        I meant that they could possibly take advantage of my and charge a high commission instead of my real estate agent helping me find the best deal. But luckily they didn’t, and it all worked out VERY well.

        Reply
  11. Tanya

    When we bought our first home we had the best realtor. She was so helpful. It made the whole process easy. We ended up getting the perfect house and what we were willing to pay and a really low interest rate.

    Reply
    1. Jeremy

      Good to hear Tanya. You gotta love when it all lines up like that. Ours seems to be mostly going like that, but we’ll know for sure once we actually move in.

      Reply
  12. Liquid

    That guy from the other financial institution sounds like a sore loser lol. It’s okay to be aggressive selling a product, but badmouthing other lenders is unnecessary. A good sales person should keep things professional, yet can still connect with clients on a personal level. It can be a thin line to walk on at times, and some people just don’t have the right balance for it :D

    I like how you went with a floating rate. I would have gone with a 5 year variable as well. I made the mistake of going fixed when I bought my place in 2009. But I smartened up and switched to variable when I renewed my mortgage for a new term earlier this year. Fixed mortgages are like insurance policies. Pay a premium now to protect against the potential of higher costs in the future. But the bank of Canada hasn’t raised rates since Sept 2010. Nobody knows when the next rate hike is. Ultimately it’s a personal decision but I like variable :)

    Reply
    1. Jeremy

      That makes me feel a lot better knowing you went with variable earlier this year too. You’ll have to give me a heads up if you decide to refinance at a fixed rate down the road. It just doesn’t seem that interest rates will rise anytime soon despite what some ‘experts’ predict. Some of the people making those predictions do so for their own personal gains.

      I agree that the other mortgage broker could’ve been more professional about it. I can now see why he does business with my original realtor. They seem to have some similar views on business.

      Reply
  13. Shannon-ReadyForZero

    That sounds like quite the difficult process! I’ve never been through the mortgage process myself (I live in a city that charges so much for homes that I fear I will be a renter forever) but I know I wouldn’t like listening to two companies/professionals bash each other. It’s just not a good way to do business and clearly it didn’t work with you. I’m glad you found a rate you’re happy with and congratulations! I hope you’ll post some pictures of your new place soon :).

    Reply
    1. Jeremy

      Hey if I bought a place in the Vancouver area, I’m sure there is hope for you too Shannon. The prices here are through the roof. So we did have to settle for a condo instead of a house or even a townhouse. Hopefully we can upgrade down the road, but that might mean moving to a different city.

      Reply
  14. Alex

    One should keep a closer eye on the 5 year govt bond yield, which the 5 year fixed rate tracks, instead of the Bank of Canada overnight rate, which the 5 year variable rates track

    The 5 year treasury rate will move first, well before our central bank begins raising the overnight rate. Someone only looking at variable rates may miss the move in bond yields, and by the time you realize whats going on, the only fixed rates you can lock into will be at 4%.

    Personally, I’m glad i dont have to think about what rate to get in the current environment. Yes, the fixed rate premium is almost non-existent (2.79% vs P-0.3), but Canadian economy also looks like it might tip into recession, so its not unthinkable that the central bank might actually CUT rates. That would certainly catch a lot of folks off-guard. Best thing I’ve learned is that mMarkets always behave to screw over most amount of people possible. Always take time to think about the unexpected

    Reply
    1. Jeremy

      Good advice Alex. It would be nice to later lock in a fixed rate before rates increase and not after. I wouldn’t mind at all if the rates kept going down instead. They might very well need to take that step to keep the housing market afloat if the economy worsens.

      Reply
  15. Lou Rodriguez

    And the moral of the story is? This process is all about YOU! What is best for you and what YOUR objective is. Anyone that doesn’t subscribe to that theory in helping you during the home buying process, that’s the person you don’t want to work with!

    As a Realtor, when I go on a listing presentation, that’s my first question; what’s your objective? Then we move from there with my consult and expertise.

    Here’s wishing you continued good luck during this process :)

    Reply
    1. Jeremy

      I think you’d be a pretty solid realtor Lou. It’s too bad that you don’t do business up this way. There is a huge contrast between the people that really want to help you and the ones who just want to help themselves.

      Reply
    1. Jeremy

      When you do go through this stuff, watch out for those shady professionals. In any industry with a lot of money involved, there are bound to be a lot of people looking to take advantage without caring about your interests.

      Reply
  16. Shannon @ The Heavy Purse

    It sounds like you got a great rate, Jeremy, even if you did have to jump through a few hoops to get there. :) While I am certainly a proponent of life insurance and disability insurance – it’s probably not the right time to bring them up when someone just wants a mortgage! We just did a refi on our mortgage and brought it down to 3% which made me very happy. I love living in LA but home prices are a bit crazy and from what I understand you’re dealing with a similar situation. My sister lives in the midwest in a home bigger than ours but far cheaper than mine. She teases me about it, but I just call her during a snowstorm to get back. Congrats on your new home!

    Reply
    1. Jeremy

      lol about the snowstorm phone calls. We do pay a premium to live somewhere nice. I wouldn’t say the mortgage lady was wrong to bring up life and disability insurance, but she was way more aggressive than I was comfortable with. Sometimes people should just accept a refusal and move on with the rest of business. I couldn’t imagine that insurance commission being much compared to her commission on the mortgage itself. I will consider that kind of insurance down the road, but probably not until I have kids. Until then I’ll take the risk.

      Reply
  17. Kim@Eyesonthedollar

    The very first mortgage we ever got was a horrible process and I didn’t know enough to know you could get better rates by shopping around. I think it was around 8%, but that was back in 2000, so the rates were more, but that was still high and we had PMI. We refinanced after about two years through a local bank, which was awesome and we’ve done all of our mortgages through them since then. I think you got a great rate, and it was worth the hassle.

    Reply
    1. Jeremy

      I’m glad I don’t have to pay PMI on top of my mortgage. To avoid that I made sure I had at least a 20% down payment. I agree that I got a pretty good rate in the end. So yeah it was definitely worth the hassle. If anything I wish I had spent more time shopping around to get an even better rate. That’s awesome that you’ve found a good bank to refinance your mortgage.

      Reply
  18. Edward Antrobus

    We actually changed banks after the issues we had with our primary bank over getting a mortgage. Getting denied was bad enough. Getting denied over something they never brought up as a potential problem after 2 years of discussing things, that was the deal breaker for us.

    Reply
    1. Jeremy

      I was change banks after something like that too. A good bank should have been more thorough with their analysis early on and brought that issue to your attention. In that 2 years you could’ve tried to address it or at least had realistic expectations.

      Reply
  19. Alex @ Searching for Happy

    Behaviour like your mortgage broker’s always surprises me. It is, in essence, a service industry, right? Even if you paid a bit more, going with the person you were confident in (and who could actually tell you the rate you were getting) was a wise decision.

    I’m not yet at the home buying stage, but I’m a sponge for all this info. Thanks for sharing your experiences!

    Reply
    1. Jeremy

      When service and sales fields cross it does unfortunately lead to this kind of service. Sure they are there to provide a service, but there is a big chunk of change at stake. So people’s greed sometimes overrides their desire to genuinely help people.

      Reply
  20. Canadianbudgetbinder

    We went through a broker that was great and did not pressure us at all. We found the broker on our own and did our homework by going to various institutions for comparables. There are the hungry sales type out there and if someone pressures me, I’m gone. I don’t look back. I don’t like feeling like I’m backed in to a corner or I owe anyone anything. I’d rather do my own homework when it comes to referral especially when people lay down the BS just to get a cut of the pie. We learned our lesson with our home inspector who works with the realtor. Referrals are becoming a dying art now that they continually offer people money just to say, ya you liked a service when in reality some people will do just about anything for money even if they didn’t. It’s those people that ruin it for the good guys. NO thanks. I’ll do my own homework and take my chances. Good luck with your house mate and I think you got a reasonable deal for a variable rate.

    Reply
    1. Jeremy

      You’re right that a lot of referrals are bullshit these days. They just refer you to whoever they can make the most money from regardless of whether they will actually provide good service. The interesting part is that for commission based referrals online, the FTC requires that US publishers state that relationship. Yet for offline business transactions people have nobody forcing them to be transparent about referrals.

      Reply
  21. Mike@WeOnlyDoThisOnce

    Staying firm with realtors seems to be the best approach, although it sounds like yours weren’t the pushiest. We had a great realtor who (part of her job, of course), also pushed very hard for various insurances that we didn’t need.

    Reply
    1. Jeremy

      No our actual realtor was great…much better than the first 2 we tried. The mortgage people were not as nice to deal with, but I guess part of that could be that they are less connected to your new home and emotional side of it. To them it really is just numbers.

      Reply
  22. JMK

    Perhaps I missed it, but I’m curious about the rest of the terms of your mortgage. When we renewed last fall, yes I got various brokers/banks to quote us a rate, but the rate is only one piece of the puzzle. I’m far more interested in the repayment features and would turn down a lower rate if I didn’t get the repayment terms I expect. If you plan to just pay the required amount for the next ~25yrs then I guess the rate is all you need to worry about.
    For any mortgage to be considered I need to have:
    1. option to choose accelerated bi-weekly payments (26pmts/yr)
    2. option to increase my normal bi-weekly payment up to double the regular amount.
    3. extra payments allowed up to 15% of the original mortage amt, every year and payable in any amounts/frequency I want (not limited to one annual lump sum payment).
    4. good interest rate

    I want that debt paid off ASAP and repayment terms that allow me to do it without penalties are ultimately going to save me a lot more money than a minor difference on the rate. In the end we renewed with our bank again – 5yr fixed at 2.99% with all the repayment options I wanted. We pay every two weeks (not the same as twice a month), the standard payment is rounded up to the next even $100, and every Friday I transfer at least a little extra over to the mortgage.
    When I spoke to our bank’s mortgage officer I told him I wasn’t happy with how the last renewal went (5 minutes on the phone and I found 3 independent brokerages offering better rates and the same repayment terms which the bank then matched). I told him he’d get one chance to make his best offer and if I found a better offer somewhere else he wouldn’t be getting a chance to match or beat it. We’ve been customers for 25yrs with a flawless payment history and no drama. If we don’t deserve their best deal, who does? This is our third and final 5yr term but we expect to have it paid off in under 3yrs (so under 13yrs all together).
    Congratulations on the new place, and keep in mind, if your mortgage allows for rounded up payments and additional lump sum payments, get busy on those asap. Extra payments in the early years of a mortgage have the most impact. I wish we’d known that, but instead it took us until about year 6 of our mortgage to really start whacking it down with extra payments.

    Reply
    1. Jeremy

      I really like that negotiation tactic you used with your bank. I’m going to have to try that line when it comes time to renew.

      My mortgage does allow all of that stuff except that my annual extra payments limit is 10% of the original mortgage. I have it setup for accelerated bi-weekly and I can double up payments whenever I want.

      That is a good point about making extra payments early on in a mortgage. The 2.7% of $200k is going to be a lot more than 2.7% of $100-150k.

      Thanks for the tips.

      Reply

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