Episode 303 AskJasonGelios Show

Home buyers who do mortgage loan shopping can avoid leaving money on the table.

Whether you’re shopping for new bed sheets or a new car, the drill is usually the same. Hit the reviews, check with friends, and scope out the best deal. After all, who wants to buy a car that racks up repair bills right away? Yet when picking a mortgage loan, borrowers don’t always think about comparison shopping.

In a Bankrate survey of recent home buyers, 12% of millennials said they believe their mortgage rates were too high. Some buyers may think that when mortgage rates are low, they don’t need to shop for the best offer. But even a few basis points can make a difference of thousands of dollars over the life of a loan, according to Bankrate, the Consumer Financial Protection Bureau, and the Federal Trade Commission.

You may think mortgage shopping is about as much fun as prepping for a tax audit. It’s true that comparing home mortgages can get complicated. But you don’t need a finance degree to make an informed decision. Here are some steps to get there.

Find a Few Lenders
When looking for lenders to consider, loan officers recommend going to a few sources:

• Locals you know and trust: “Make sure the lenders you’re comparing come from referrals from local people you know who’ve worked with them — like your friends or relatives,” advises Jeff Koch, senior vice president of residential lending at Draper & Kramer Mortgage Corp in Schaumburg, Ill. “Wherever you have trust established would be a good source.”
  
  
• Your real estate agent: “If you’re working with a real estate agent, find out if they have any feedback or advice on a lender or a loan officer,” recommends Jim DeMarco, branch manager and senior loan adviser at Flagstar Bank in Seattle.
  
  
• Online reviews: These can be a good starting point, DeMarco says. “If you see a lot of really good reviews, that means people are taking the time to provide them.”
  
  

Have an Intro Mortgage Loan Meeting
During a meet and greet, you and the loan officer will usually ask each other questions, and the loan officer will use that information to assess your qualifications. That may sound cut and dried, but the meeting should be fluid based on what you’re ready to do.

Typically, the loan officer would schedule a meeting focused on comparison shopping separately. If that sounds painful to borrowers who want to (literally) get moving, no worries, Koch says. “The borrower may be well versed and want to get right to what’s most relevant for them, which are the financial and comparison details. But a lot of people need to go over their own questions or cover key topics first.”

Want to meet virtually? “Some folks are just more comfortable virtually, and that’s OK,” DeMarco says. “I’ve closed loans with people I’ve never talked to on the phone. It’s all via text.”

Interview the Mortgage Loan Officer
Whichever way you choose, this meeting is prime time to interview the loan officer. Borrowers need to find someone who will be in there with them and can problem solve. “We call unanticipated problems ‘icebergs,’” DeMarco says. “You think there’s smooth sailing. And then, suddenly, you smack into an iceberg.” 

Check out the lender’s communication strategy and their process for delivering on time. “The process is highly complex, and you’d think professional lenders all would have mastered it. That’s not the case,” says Koch. “When a loan isn’t delivered on time, people’s finances and lives are basically balanced on the head of a pin, which is the closing date.”

To avoid problems, ask questions like these: 
Fact finding about the process:

• Would you take me through the process?
• What should I expect? 
• What will I need to supply?
  
  

Compatibility with the loan officer or mortgage banker or broker:

• What’s your communication style? Are you willing to communicate virtually?
• When would I work with you? Are you available in the evenings?
• Will I work with you or a member of your team?
• What do you think of my time frame to get to closing?
• What if any problems do you foresee?
  
  

Track record of loan officer and lender:

• How long do loans you process typically take to close?
• How would you expedite the process if there’s a tight time frame?
• About what percentage of loans you work on close on time?
• How many loans have you worked on that haven’t closed or haven’t met deadlines? 
• What’s the biggest problem you’ve had with a loan and how did you fix it?
  
  

Use the Meeting to Learn
You can also use the meeting to clarify general info you’ve picked up online and talk about your concerns. DeMarco gives a couple of examples. “You may have switched careers or industries in the last year or started having bonus or commission income. Your research may have shown you can just divide your salary by 12 to figure monthly income. But it may not be as simple as that.”

You’ll also want to bring up concerns like the impact on your credit score. Thirty-eight percent of buyers think comparing multiple mortgage offers in a short time will hurt their credit rating, according to a 2020 LendingTree survey. “As long as the lenders all pull the borrower’s credit within a couple of weeks, it’s counted as a single credit inquiry. So, it’s not a problem if they do it within a narrow band of time,” Koch explains.

Get and Compare Financial Information
Whether you’re looking at a federal form called a loan estimate or a precursor form called the fees worksheet, you’ll see a breakout of closing costs, explains Koch. “To compare the lender financials, you’ll want to drill down to origination charges in the lender section. Make sure you’re comparing apples to apples. If one lender is offering a 30-year fixed rate at 2.875% with no lender fees and another is offering 2. 75% with $1,500 in lender fees, those are unlike products. Get the fees at the same rate to find out which is less expensive.”

6 Tips to Get Mortgage Loan Information
Comparison shopping can get complicated.

Here are six ways to keep it simple:
1. Keep Your Pool Manageable
Mortgage shopping “depends on the borrower and the personality type and how they’re wired,” Koch says. “The process can seem overwhelming. That’s why it makes sense to have a select few options to compare so borrowers can process and assimilate them.”

2. Get a Fees Worksheet
The best way to compare effectively is to zero in on the fees worksheet, which the loan officer should provide. “You’ll be able to figure out just what the lender’s direct fees are, and you can make a nice, simple comparison,” Koch explains.

3. Understand a Fees Worksheet Versus a Loan Estimate
The numbers on the worksheet are estimates and not locked in. Interest rates are fluid and change daily or even more often, DeMarco says. On the other hand, after you have a contract with a seller, “the loan estimate and loan application are where the information is binding, barring structural changes to the loan,” Koch says. Make sure the information reflects previous discussions with and disclosures by the loan officer.

4. Be Careful Interpreting Third-Party Fees
Third-party fee estimates are included on the worksheet. Two lenders could each come up with different estimates for title, escrow, or appraisal fees, Koch explains. But not all are negotiable. For instance, the seller chooses the title company, so the lender doesn’t control the choice or the fees. The lender could be choosing the high or low end of a range, but it’s only an estimate.

5. Think About Timing
Make sure lenders are using the same time frame for locking in pricing and that it will extend through the closing, Koch notes. “A lender might offer a rate that’s a lock for three weeks, but if you anticipate or know your closing date will be five or six weeks out, that’s a problem.”

6. Consider Applying for Loan Approval Before Finding a Property
“Many lenders will not do this,” Koch says. “But some will allow borrowers to go through the formal underwriting process — not just pre-approval — without having a property. The borrowers can get a bona fide mortgage commitment with all of the major buyer financials truly underwritten at that point. Then when borrowers make an offer, they can close more quickly.”
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You’ll have to invest some time and effort into comparison shopping for a mortgage loan and selecting a lender and a loan officer. But your return on investment can pay off over the long haul.

Not feeling like a big spender these days? Check out the rewards of small home improvements.


How can myths sound so right yet still be wrong? Take the one that says homeowners need to do a big remodeling project (think HGTV gut rehab) to get a worthwhile return on investment or happiness. Not necessarily, according to the most recent National Association of REALTORS® “Remodeling Impact Report.” The survey found that homeowners can get payback and joy from several smaller, lower-dollar-value home improvement projects.
 
That’s good news for the one in five millennials and Gen Xers who had to compromise on the house they bought in 2021. Ditto for potential buyers whose offers were rejected and who are staying put for now. If you’re coping with inflation but eyeing a home improvement, a smaller remodel is worth considering.

Small projects are suited to DIY, which can save you cash. NAR research showed that 10% of young millennials, between 23 and 31, want a fixer-upper home where they can work on DIY projects. The supply chain is also cooperating, as some products used in renovation are coming back into the market. 

Of course, kitchen and bathroom makeovers will always have a place in our hearts — if not our wallets. The following five high-performing projects listed in the NAR report are less expensive — though admittedly less exciting — options. But then again, there’s nothing woo-hoo about your scratched and dinged hardwood floors or having your utility bills outpace your grocery bills. 

#1 Hardwood Flooring Refinish or Replacement
“Interest in hardwood floors was definitely the headline from this year’s report,” says Jessica Lautz, vice president of NAR Demographics and Behavioral Insights. In fact, refinishing hardwood floors grabbed the top spot for interior remodeling projects that bring the highest return. Remodelers estimated the cost at $3,400, and REALTORS® estimated the value recovered at $5,000, a whopping 147% return. Consumers gave the project a joy score of 10 out of 10. On top of that, 100% of consumers surveyed said they want to be at home more after finishing the project. For 64% of consumers, the most important benefits were durable and lost-lasting results and materials.

“With hardwood floors, you get a lot of bang for your buck, and they’re not that expensive,” Lautz says. “And people really like them.” Post pandemic, homeowners are still concerned about cleanliness, and hardwood floors are relatively easy to clean. Plus, with increased pet adoption, homeowners prefer surfaces that are less likely to stain or retain odors. 

Refinishing makes sense when everyday life has left scuffs, dents, dullness, and scratches — all unwanted reminders of spills, accidents, dragged furniture, and ground-in dirt from foot traffic. Your options for refinishing will depend on whether the coating or the wood itself is damaged. The deeper the damage, the higher the refinishing cost.

New wood flooring snagged the second-highest score for interior projects, with a $5,500 cost and a $6,500 cost recovery, netting 118% in value recovered. Although it’s a bigger investment than refinishing, new flooring will let you opt for the hardwood and finish you prefer. And that will affect the floor’s durability and appearance.

#2 Insulation Upgrade
Buyers want to cut their energy costs where they can, Lautz says. “We see consumers who want a home that’s energy efficient. They want their utility costs cut and efficient heating and cooling. But the typical home they’re purchasing is 29 years old and quite dated. So, it may not have good insulation.”

Making this home improvement could factor into more than comfort level and energy prices by appealing to buyers when you’re ready to sell. In a survey of REALTORS®, 63% said promoting energy efficiency in listings was very or somewhat valuable. That’s in line with preferences of home buyers, who ranked the importance of heating/cooling and insulation at seven out of 10.

If you’re still on the fence, consider that an insulation upgrade, at an average cost of $2,500, is relatively inexpensive. And it recovers $2,500 for a break even. The joy score of 10 is worth shouting about. 

You can tackle an insulation upgrade as a DIY project; some can be done in a short 15 minutes. Installing certain types of insulation materials, like fiberglass and mineral wool, are especially DIY-able, according to the North American Insulation Manufacturers Association. But spray foam and some other insulation types require a professional. The Department of Energy offers advice too: The maximum thermal performance, or R-value, of insulation greatly depends on how well it’s installed. So, it pays to stick within your skill level. 

#3 Closet Renovation
Consumers surveyed took on a closet upgrade for two main reasons: to add features and improve livability, and to improve organization and storage. This update averaged $6,000, costing more than some of the other smaller projects. But the cost recovery was substantial, at $5,000, or 83%. 
  
On the satisfaction side, more than three-fourths of consumers (79%) said that now that they’ve remodeled, they want to be at home more. Almost half said the most important result for them was greater functionality and livability. And the joy score? Another perfect 10.


Closets are using something like a Legos approach when remodeled, according to the pros. “You take the basic building blocks — like drawers, hangers, hampers, shelves — but you use them differently and add to them,” says David Cutler, president of The Closet Works in Montgomeryville, Pa. “People want storage for their particular needs. If you have 100 pairs of shoes, you need creative ways to deal with shoe storage: shoeboxes, slanted shoe shelves, straight shoe shelves, shoe cubbies.”


#4 Add or Upgrade Laundry Area
Laundry wrangling is more of a chore if you don’t have enough work space or you’re missing certain features, like a countertop or a sink. Consumers in the survey said they focused on laundry room improvements to add features and improve livability or because they had just moved into their home and wanted to customize it. Sixty percent said the most important result was better functionality and livability, so they met their goal. The overall joy score was 9.5.


Laundry room remodeling costs $4,000 to $12,000, according to FixR. Why the broad range? Laundry rooms can be located in different parts of the home and vary in size and shape. Most people pay around $7,000 for a 35-square-foot laundry room that includes mid-range upper and lower cabinets, a laminate countertop, and front-loading appliances, FixR says.


Of course, you can upgrade an existing laundry room or space by adding à la carte features. Popular add-ons include stock or custom cabinets, a sink, countertops for work space, good lighting, and durable flooring. Some of the fancier options include units for hanging wet items like T-shirts so they can drip into the sink and racks that pull out of drawers for drying fine woolens, Cutler says. 


Don’t forget about small DIY improvements — like painting walls or cabinets and adding lighting. They’ll help you customize the space so you might almost enjoy doing laundry.  
  
#5 Paint One Interior Room
Painting an interior room is one of the most DIY-friendly small home improvement projects. There’s nothing like it to freshen a room or fix a quirk or two. More than half of the consumers in the survey chose it because they wanted a change. And more than a quarter wanted to upgrade worn-out surfaces, finishes, and materials. Most of us fit into one or both of those groups, right? Beauty and aesthetics were the most important results consumers mentioned. And the joy score? 10. 


Hiring a professional to paint a room costs $990 to $1,320, according to FixR. The variation stems from the type of room and its square footage, plus the type of finish. 


With practice and a little advice, even a novice DIYer can get great results. If you’re stuck on what colors to pick, there’s more advice out there than you can shake a paintbrush at. Most major paint manufacturers have released a color or palette of the year for 2023. If you want to follow your own preferences but would like a little guidance, you can get tips about how to choose complementary colors you’ll like over the long term. 


The NAR remodeling survey also includes info for the big projects, like bathroom and kitchen renos, and basement and attic conversions to living areas. But depending on your priorities and budget, a smaller upgrade may make you happy and bring a healthy return.