By doing research, even repeat buyers can learn more and save money

At age 23, soon after graduating from the U.S. military academy at West Point, Lauren St. Germain bought a little townhouse in a small town near the Army base where she was starting work as a pilot. While she didn't exactly understand the home buying procedure, it didn't seem difficult at the time. "I used my VA (Veterans Affairs) benefits and they held my hand through the whole process."

Several years later, after joining the civilian workforce and renting for a while, she decided to buy again. This time, Lauren was living in a metropolitan area where homes can be expensive and sometimes hard to find. She found her previous home buying experience almost useless.

"I didn't realize what a big deal it is. The first time I didn't think about comparison shopping. I didn't need a down payment, and I didn't need to do research. This place cost five times more than the first one. It felt overwhelming," Lauren said. "This market is so different."

As do many repeat buyers, Lauren felt as though she had never bought a house before and that the process was completely different than she remembered. She decided to do some research before she started shopping.

Lauren spoke with friends and co-workers and received several lender referrals. She contacted four of them and compared not only loan types and interest rates but also various fees. To track the information, she set up a spread sheet. She also used worksheets provided by the lenders. She asked questions about prepayment fees and the costs and benefits of financing points and closing costs. She also asked lenders to negotiate on some fees.

Lauren paid particular attention to the "800 series" fees. These are fees that the lender directly charges the borrower, and they may be negotiable. They appear on the government-required disclosure, the Good Faith Estimate, on the lines starting with 800. These fees include origination fee, discount fee, appraisal fee, credit report fees, tax service fee, origination fee to the broker (similar to discount fee), processing fee and escrow waiver fee. Some of the "1100 series" fees also may be negotiable with the lender or with the closing agent. These include closing fee, document preparation fee, notary fee, attorney fee (if applicable) and title insurance fee.

She spoke with Internet-based and local lenders and while each offered advantages, she chose a local one because she felt more comfortable working with someone face to face.

"The best thing I did was figure out the financial part first. I talked to loan officers before I saw houses." She also figured out how much more she could afford over the rent she had paid based on the tax advantages of owning. "I did a reality check on how much of a stretch it would be."

Lauren chose a 30-year fixed-rate loan and had 10 percent to put down. To fund the other 10 percent of the down payment needed to avoid private mortgage insurance, she took out a home equity line of credit (HELOC), which does not have a fixed rate but adjusts down when she makes a payment. She made this decision based the interest rates at that time.

After doing the homework, Lauren went condo shopping with her roommate, who was also planning to buy her own place, and found a place she knew she could afford on the first day. Though Lauren's mortgage is more than the rent would have been had she stayed alone in the apartment she had shared with her roommate, she is gaining equity and enjoying tax savings, "and there's something about it being your own."