Expert Advice on Finding the Best Mortgage Lenders

Aug 1, 2020Home Buying

Looking to buy a home comes with some legwork and that means doing your due diligence to make sure you’re getting the best possible mortgage rate out there. Here we’ll look at some financial expert tips on finding the best mortgage lenders.

1. Build Your Credit Score As High As Possible

Anyone can’t just qualify to buy a home because they want to. There are certain financial obligations including meeting specific credit and income requirements to get approved by a mortgage company. They want to make sure that if they approve your loan you’ll be able to pay it back and there are a few ways they check.

First is a credit check and if your credit score is lower than 640 you may be out of luck for a private bank mortgage loan. If your score is lower than 580 you’ll also be unable to get approval for a government backed FHA mortgage loan. The higher your credit and the great number of on-time payments you make, the better your chances of negotiating a descent interest rate and getting approval for the loan.

In order to boost your credit score be sure your credit report is accurate (without errors). There are three government credit bureaus which provide you with your report for free once a year, they are: Experian, Equifax, and TransUnion.

Pay off debts with higher interest rates that you may have and reduce the total amount of debt that you have, this will boost your credit score. Pay off credit cards and loans wherever you can prior to starting the mortgage process if possible and this will provide you with more money for a down payment and also will improve your credit score. The higher your credit the better you’ll be when looking to buy a home.

2. Know Who Can Provide Mortgages

There are more than traditional private banks who provide loans so you should know where you can look. Here are some of the choices:

Mortgage bankers: these individuals are employed by specific financial institutions like banks and can package loans together for consideration by the bank. They work specifically with mortgage loans meaning they are typically very knowledgeable.
Credit unions: these are financial institutions owned by their members and often can provide more favorable interest rates than privately held banks for this reason. They also tend to have less strict membership guidelines making them likely to be able to work with you.
Savings & loans: These are far less common than they used to be but they still exist. They are smaller financial institutions and often work within their own community essentially serving the community where other banks may not. Something to look into.
Mutual saving banks: these organizations are also very community oriented like Savings & Loans and could be the right fit.
Correspondent lenders: these organizations can provide a loan but may in turn sell the loan to a larger bank like Bank of America or Chase.
Be sure to do research into any lender you’re considering. It’s a smart idea to look at the Better Business Bureau for honest reviews, not all lenders are created equal.

3. Compare Rates From Multiple Lenders

Your best bet is to start by searching on the web for the best mortgage rates available. Remember the rates and a quote you see from an online mortgage calculator will be general and it may be slightly different when really going through the process. Lenders will pull your credit report records during the loan application process to determine if you’re a good candidate for a loan. If you receive news of a good rate and something you like as a whole it’s a good idea to lock it in.

After you’ve gotten a few different quotes you should compare them to one another. Which has the lowest interest rate? Which has the lowest minimum down payment? Which has the best terms? When looking at these factors in a comparison you can see which one will be the best option for you.

Remember that the lowest rate doesn’t necessarily mean the best lender but it should be something that you look at carefully. A lower interest rate will mean less paid back and on a mortgage which can be 30 years in length that is a big deal.

4. Get A Preapproval

When you start looking at homes if you get a mortgage preapproval letter it will give you an edge over other perspective home buyers interested in the same property. Because its a long process typically to purchase a home from start to finish a seller or real estate agent will favor you more if they know that you are already approved for a mortgage.

To get a preapproval you’ll have to provide different financial information. Typically this is the data that you’ll need to provide:

Social security number and of any co-signer
Bank account, checking, savings, and investment account information.
Current debt you have like credit cards, auto loans, student debt, or others
W-2’s and 1099s for 2 years with tax returns
Your employment and salary information
Info on your ability to make a down payment and the source of the funds
Also, get preapproval from more than just a single lender.

5. Read all Fine Print and Ask Questions

You can reduce the number of choices you’re considering by asking around for referrals including from family, friends, or your real estate agent. Don’t forget to search the web as well. Then get ready to start asking some questions.

  • How do you stay in contact with your clients? Phone? Email? How quickly can we get replies to questions?
  • What is your typical length of time from preapproval through the whole process to closing?
  • What fees will I be required to pay at closing time? What commission percentage? etc.
  • Can any of those typical fees be reduced or eliminated?
  • What are my minimum down payment thresholds?

There may be other questions you want to get answered before moving forwards with the lending process. Some of them will offer the option to buy points towards the mortgage in order to reduce the interest rate percentage. This can be a smart choice for some on a tighter budget.

There could be other costs through the process beyond the initial principal and closing payments. Things like closing costs and taxes should be known ahead of time. Always read the fine print on every document and if you’re unsure of the language have your attorney look at it.

Using these methods you can get the best mortgage possible for your home buying experience. Good luck!

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