Do You Offer Preapproval Or Prequalification
Preapproval and prequalification are two processes that are often confused with each other. Lets break each down:
- Prequalification: During a prequalification, a lender asks you questions about your income, credit score and assets to give you an estimate of how large of a loan you can get. However, they dont verify any of this information, which means that the number you get during prequalification can easily change if you report incorrect information.
- Preapproval: During a preapproval, your lender verifies your income, assets and credit information by requesting official documents, including your W-2s, bank statements and tax returns. This allows your lender to give you an accurate mortgage loan figure.
Ask your lender about the difference between prequalification and preapproval, because it often doesnt mean the same thing. Then, ask which one is right for you. The answer will change depending on how serious you are about buying a home at the time you apply.
Doing The Job Vs Doing The Job Well
It pays to work with the latter, of course. Mistakes can waste timeand money.
Being licensed doesn’t necessarily equate to being good. There are mortgage brokers armed to transact, and then there are mortgage brokers armed with knowledge of products, knowledge of how to navigate the co-op questionnaires, and knowledge to customize what suits each borrower, says Julie Friedman, associate broker with The Friedman Team at Compass. Our team knows in five seconds which mortgage broker will screw up the deal and cost the borrowers extra time, extra fees and headache and which outstanding mortgage brokers will cover our buyers with grace and efficiency.
What To Do If Youre Unhappy With Your Loan Servicer
Unfortunately, you dont have a say in whether a mortgage lender transfers your loan to a servicing company. They have the right to transfer the loan and decide where it ends up.
Even so, if youre unhappy with your loan servicer or experience major issues, you can file a complaint with the Consumer Financial Protection Bureau.
Remember, too, that not every lender transfers their loans to a servicing company.
Some lenders have the capacity to service their own loans and handle the ongoing administration of these loans. This is rare, but it does happen.
If you prefer a lender that provides their own servicing, you can apply with one of the following banks:
- Quicken Loans
- US Bank
In addition, many local and smaller community banks service their own loans, as well as some credit unions.
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Do I Need An Escrow Account
An escrow account is a type of neutral savings account that holds money for prepaid property taxes and insurance premiums. Escrow accounts, which are usually established during closing, are often required for government-backed loans and optional for conventional loans.
Ask your lender if you need an escrow account. If youre required to have one, ask what options you have for paying for shortages and whether you can get a refund if you overpay. Make sure you also find out how much money youll need to hold in escrow.
Switching Mortgage Lenders If You Have A Collateral Charge
Your mortgage can be registered with a collateral charge. If thats the case and you want to switch lenders, you may have to pay fees. These fees cover the removal of the charge from your existing mortgage and the registration of the new one.
You must meet certain criteria to remove the charge from your mortgage. You must repay in full or transfer to the new lender all loan agreements secured by the collateral charge. This includes car loans or lines of credit.
To find out if your mortgage has a standard or a collateral charge, ask your lender, lawyer or notary. Allow a few months before your renewal date. This will allow you time to consider your options based on how your mortgage is registered.
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It’s About More Than Just Borrowing Money To Buy A Home
Youll find plenty of places to get a mortgage loan when youre ready to finance your home purchase. Two of the most common options are dedicated non-bank mortgage lenders, such as Quicken Loans and SoFi, and large banking institutions, like JPMorgan Chase and Wells Fargo. Each offers something the others don’t, so your choice could depend on your priorities.
Does It Really Matter Which Mortgage Lender You Choose
If you are asking the question above, read on to find out about an experience that defines the answer to whether or not the mortgage lender you choose matters.
Recently, I represented a listing for a seller who wanted to move out of Loudoun County to West Virginia. Now was the perfect time to move to a lower cost of living area and get out of their HOA neighborhood to gain a little more privacy. The seller was working from home and the location they chose had a great commuter access via the train to DC should the need to commute arise as well as a nice 3 acre lot.
We placed their home on the market and it sold quickly. The buyers were using a lender that appeared to be good. They were a mortgage lender whom the buyer agent had supposedly done many deals successfully over the years . As a listing agent, I did my due diligence to check with the lender to find out if they had their own in house underwriting team, in general how things looked to meet our closing date, etc. All seemed good. Unfortunately there are many factors that go into a smooth mortgage process and not all can be predicted ahead of time.
This deal was a nightmare and stressful to all of the participants. It could have been better though with good communication and more attention to detail upfront. There were many items asked for at the 11th hour which could have been requested much earlier in the process.
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Shop For A Mortgage Loan Not A Mortgage Servicer
The bottom line is that you likely wont have to interact with your loan servicer much if at all.
That means it shouldnt be a top concern when shopping for a mortgage.
Its more important to shop for the right loan type, a low rate, and fair loan terms, since these are the things that decide how much youll pay in the long run.
But if youre concerned about who your servicer will be, dont be afraid to ask. If a lender is quiet or cagey about its servicing partners, thats probably a bad sign.
But if theyre forthcoming with the name, youre free to do your own research and decide if its a servicer youd be comfortable working with.
Check The Broker Is Licensed
Before meeting with a broker, make sure they have a licence to give you credit advice.
Search the following lists on ASIC Connect’s Professional Registers:
To search, choose the list name in the ‘Select Register’ drop-down menu.
If the broker isn’t on one of these lists, they are operating illegally.
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Should I Care Who My Mortgage Servicing Company Is
Since mortgage servicing experiences can vary, some homebuyers want to know the name of the company that will service their mortgage after closing.
This is understandable. But when shopping for a mortgage loan, the focus shouldnt be on the servicing company. It should be on getting the most affordable loan. This can potentially save thousands over the life of the loan.
In all honestly, even if your mortgage lender transfers the servicing rights, youll probably have little interaction with the servicing company.
When shopping for a mortgage, the focus shouldnt be on the servicing company. It should be on getting the most affordable loan.
Keep in mind, too, that many reputable lenders also partner with reputable servicing companies.
So if you want to increase the odds of having a positive experience with a mortgage servicing company, start by getting rate quotes from well-known, highly-rated lenders.
Also, dont be afraid to ask questions. If youre concerned about servicing, inquire as to whether a lender services their own loans.
If theyll transfer your mortgage, get the name of the servicing company they use. From there, you can research the company to make sure it has a good reputation and high ratings with its customers.
Home Loans And Your Financial Plan
- While financial advisors cant directly help you get a mortgage, they can ensure that your financial plan isnt overly impacted by the introduction of monthly loan payments. Finding a qualified financial advisor doesnt have to be hard. SmartAssets free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If youre ready to find an advisor who can help you achieve your financial goals, get started now.
- If you eventually want to retire, its imperative that you dont overspend when you buy a home. Doing so could cripple your finances for years, making it very hard to accrue any significant amount of retirement savings. To ensure you stay within your financial bounds, use SmartAssets home affordability calculator.
Do You Offer Mortgage Points
Mortgage points are an optional fee that you can pay at closing to buy a lower interest rate and save on the overall cost of the mortgage loan. The cost of each mortgage point is equal to 1% of your total loan.
For example, if you take out a $150,000 loan, you may have the option to buy mortgage points for $1,500 each at closing. Mortgage points are most beneficial for home buyers who plan on living in their home for a long time because they can save tens of thousands of dollars over their loan term.
Be sure to ask your lender when it makes sense to buy mortgage points, how much each point will lower your interest rate and what the maximum number of points you can buy is.
Is It Better To Use A Mortgage Broker Or Bank
When you’re ready to start the homebuying process, you’ll need to figure out where to shop for a mortgage loan. The number of companies you can choose from is nearly endless, but they typically fall into two primary categories: mortgage brokers and banks or credit unions.
Should you choose a bank or a mortgage broker to help you get a home loan? It’s a fair question, given how complex the mortgage application process can be. Whether you’re buying a home or refinancing, you’ll need to work through a loan application, understand your loan offers, navigate escrow and finally secure your funds. You’ll need to determine who will do a better job of helping you decide how much house you can afford and which loan option works with your personal circumstances.
Choosing between working with a mortgage broker or a bank, also called a direct lender, will depend on individual factors, including:
- The strength of your current banking relationship
- Whether or not you need flexibility in a lender
- Referrals and recommendations
- Who has the loan options you want
Banks and brokers are both good choices. Read on to learn more about what makes each one different.
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Better For Your Credit Score
A broker can make it possible for you to apply for several mortgages within a short time frame — a smart move from a credit-score standpoint.
Here’s why: Each time a lender pulls your credit history to determine whether you’re a viable loan candidate, that counts as a hard inquiry on your credit score, which can bring that number down a little. A single hard inquiry won’t do much damage, but multiple hard inquiries could hurt your credit score a lot more. If you apply for multiple mortgages within a short period — generally 30 to 45 days — all of those hard inquiries count as a single inquiry, thereby preserving your credit score. Without the help of a broker, you might struggle to get all your applications in quickly enough to avoid the hit.
Want A Better Mortgage Rate
Compare the best mortgage rates available
|Easy to use: Brokers are a one-stop shop.||Lack of familiarity: Youâll need to deal with a new person during your application.|
|Free: Brokers are paid by lenders, not by you.||No access to some lenders: Not all lenders work with brokers.|
|Better rates: Brokers have access to more, and lower rates .||More documents may be needed.|
|Access to more lenders: Brokers make it easier to compare multiple lenders.|
|Expert advice: They live and breathe mortgages, and can help you navigate.|
|Independent: Good brokers want you to get the best rate possible, regardless of your final lender.|
Letâs go into some more detail on the pros for using a mortgage broker in Canada:
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Get Preapproved For A Mortgage
Obtaining a mortgage preapproval with three or four different lenders is really the only way to get accurate loan pricing, because with a preapproval, lenders do a thorough review of your credit and finances.
Lenders can have different documentation requirements for preapproval. Generally, youll need to provide:
- Drivers license or other government photo ID
- Social Security numbers for all borrowers
- Residential address history, as well as names and contact information for landlords in the past two years
- Pay stubs from the past 30 days.
- Two years of federal tax returns, 1099s and W-2s
- Printouts of bank statements for all accounts for the past 60 days
- List of all financial accounts and other retirement savings plans)
- List of all revolving and fixed debt payments, including credit cards, personal and auto loans, student loans, alimony or child support
- Employment and income history, along with contact information for your current employer
- Down payment information, including the amount, source of the funds and gift letters if youre receiving help from a relative or friend
- Information on any recent liens or legal judgments against you or other borrowers, such as IRS actions, bankruptcy, collections accounts or lawsuits
Ishbia says borrowers should hold tight after preapproval and avoid opening new lines of credit, moving around money in your bank accounts and changing jobs before and during the mortgage process.
How Much Does A Mortgage Broker Cost
While the idea of having someone do the work of finding a good mortgage for you is appealing, there is always the concern of the associated fees. After all, this is a licensed professional and there is a lot of work involved.
That said, you may be surprised to know that, depending on your circumstances, you may not have to pay a mortgage broker at all. Thats right, your mortgage brokers services may be free. Let me explain why.
A mortgage broker gets paid a finders fee by the lender when they finalize a deal. This is why its in their best interest to find you the best deal so that you sign with them. If you dont sign a mortgage, then they dont make any money. However, thats a lot of time and work to put in and not get paid, so to best avoid this situation, brokers will qualify their clients.
Qualifying clients is essentially determining their risk level. Qualified clients are what banks referred to as prime clients. These are generally low-risk people with full-time jobs, a good credit history, proof that he/she pays the bills, and has little or manageable debt. Basically, the type of client that can be easily approved for a mortgage. These qualified or prime clients will not have to pay any mortgage broker fees and get the added benefit that they will also have access to the most competitive prices on the market.
Mortgage broker fees should be discussed ahead of time and included in the agreement.
What Credit Qualifications Do You Require
A is a three-digit number that indicates to lenders how likely you are to be able to pay back the money you borrow. The higher your credit score, the easier it is to get a mortgage loan. However, you can still find ways to buy a home if you have bad credit you just may have to pay more for your loan.
Each lender sets its own standards for what they consider an acceptable credit score. Thats why its vital that you ask your mortgage lender about credit qualifications early in the process. If you have a good credit score, you also may want to ask your lender if you qualify for any special offers or lower interest rates.
Find A Mortgage Lender To Fit Your Situation
Although most home buyers think they should be shopping for the best interest rate, pricing is very similar between lenders. Its usually the type of home loan you get and the loan terms you choose that save you the most money.
To qualify for the lowest rates and fees available today, you need excellent credit and a substantial down payment. Without those two things, a lender who can work with your personal situation becomes even more important.
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Mortgage Loan Insurance Premiums When You Switch Lenders
You may have to pay a new mortgage loan insurance premium when you switch lenders, if:
- the amount of your loan increases
- you extend the amortization period
If you already have mortgage loan insurance on your existing mortgage, tell your new lender. This may help you avoid paying mortgage loan insurance premiums twice. Ask your existing lender for a certificate number. They can provide you with a copy of the insurance certificate when you receive your mortgage contract.
You need to sign the registration documents that are part of your mortgage contract. You may have to meet with your lawyer or notary.