Avoid Shiny Object Syndrome
When comparing mortgage rates online, remember the truism:
If it looks too good to be true, it probably is.
Often the headline interest rates, the as low as rates you see marketed online, are intentionally enticing. Typically, sites that show these rates generate leads for lenders who will actually offer you a different rate after theyve had a chance to learn about your financial background.
Regardless of what you see, your interest rate and terms will be determined by your credit score and financial situation. If youve had credit issues in the past, and you see an online offer at a very low rate, read the fine print and continue shopping to see if credible lending sources will offer you a similar rate.
Best For Flexible Down Payment Options
Who’s this for? Chase Bank provides several options for homebuyers who would prefer to make a lower down payment on their home. The traditional advice has been to make a down payment that’s about 20% of the price of the home, however, Chase offers a loan option called the DreaMaker loan that would allow homebuyers to make a down payment that’s as low as 3% .
This option is made for those who can only afford a smaller down payment, but it also comes with stricter income requirements compared to their other loans , according to the Chase team). If you meet the income requirements for the DreaMaker loan, this option could be very attractive for those who would prefer to make a down payment that’s as small as possible so they can have more money reserved for other homebuying expenses.
In addition to the DreaMaker loan, Chase also offers a conventional loan, FHA loan, VA loan and jumbo loan . Much like other lenders, Chase has a minimum credit score requirement of 620 for their mortgage options.
Chase offers mortgage terms that range from 10 years to 30 years, as well as fixed rate and adjustable-rate mortgages . This lender also offers discounts for existing customers, but the requirements are rather high: For $500 off your mortgage processing fee, you need to have $150,000$499,999 between Chase deposit accounts and Chase investment accounts $500,000 or more in these accounts can get you up to $1,150 off the processing fee.
Look At The Lenders Rates And Fees
Low mortgage rates are all over the headlines these days. While this is a great opportunity for some people to shop for a home or refinance, thats not the case for everyone. To qualify for the best mortgage rates, youll need a combination of a high credit score, low debt-to-income ratio, and a solid down payment.
While every lender will look at your credit score, debt, and assets, each will assess you slightly differently. This is why you may find better rates with a different lender. So it pays to shop around for the best rate.
But its more than just finding the best rate. You need to look at the fees as well. If you have to pay bigger upfront fees, it can easily wipe out the potential savings of a lower interest rate.
This is why rates and fees need to be shopped for at the same time. To accurately compare fees and rates youll need a loan estimate, which youll get within three days of submitting an application. Submitting an application also allows you to lock in the interest rate, Beeston says.
In addition to standard mortgage origination fees, also make sure to check for mortgage points, also known as discount points, says Beeston. I have people who send me loan estimates all the time. Im seeing lenders charging five points I dont even know how its legal, she continued. Discount points cost 1% of the loan total and typically reduce the interest rate by one-eighth to one quarter of a percent.
Also Check: Chase Recast Mortgage
Why You Can Trust Bankrate
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our mortgage reporters and editors focus on the points consumers care about most the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more so you can feel confident when you make decisions as a homebuyer and a homeowner.
So Who Is The Best Lender
Ultimately the winning combination for most people searching for a mortgage loans is to use a good local mortgage broker, and a Loan Officer there with a lot of experience.
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If youre ready to learn more about home financing options, our team at Cambria Mortgage is here to help! Connect with one of our trusted Mortgage Loan Officers today by calling 552-3681 or visit JoeMetzler.com. Were here for you!
Cambria Mortgage, the Joe Metzler team lends in Minnesota, Wisconsin, Iowa, North Dakota, and South Dakota only.
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Equal Housing Lender. NMLS 274132, 322798. We lend in the following states: MN, WI, SD, ND, IA, This is not an offer to lend or to extend credit, nor is this a guaranty of loan approval or commitment to lend. The information here may not be up-to-date and may no longer be accurate. Products and interest rates are subject to change at any time due to changing market conditions. Actual rates available to you may vary based upon a number of factors. Consumers must independently verify the accuracy and currency of available mortgage programs. All loan approvals are subject to the borrower satisfying all underwriting guidelines and lo
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Check Out The Lenders Reviews
Lender reviews can be an incredibly useful tool to help you choose a someone to work with because they can give you great insight into what its like to work with a particular lender. Zillow has the largest online lender directory with hundreds of thousands of lender reviews. You can search for your lender on our lender directory to read reviews.
What To Consider When Getting A Mortgage
When you shop for a mortgage, your lender or mortgage broker provides you with options. Make sure you understand the options and features. This will help you choose a mortgage that best suits your needs.
This includes your:
- amortization
- payment frequency
You can find information on each of these features in the sections below. For more detailed information on each item, click on the links provided.
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What Is A Mortgage Broker Vs A Mortgage Lender
Before you obtain a loan, you should understand how mortgage lenders and brokers differ, so you know whose assistance you require. A mortgage lender works for a bank or financial institution to determine the qualification of borrowers and provide them with funds. However, a mortgage broker works with borrowers to help them shop around and find the appropriate lender for their circumstances.
Instead of researching different types of loans and lenders independently, mortgage brokers do the work for you. After they find the right loan and lender for your financial situation, they help you gather the information you need to fill out your mortgage application. As a result of the services brokers provide, you pay them a commission, which is a percentage of your ultimate mortgage amount.
Before choosing to work with a mortgage broker, you should understand how they operate. Some mortgage brokers primarily work with specific financial institutions and promote lenders with whom they have long-standing relationships.
Given the differences in their roles, the questions you would ask a mortgage broker are different from those youd ask a lender. Here are some important questions to ask a mortgage broker:
Mortgage Lenders Comparison: Cost
The key items to consider when selecting a mortgage lender are costs and services. Understanding the terms of your loanthe amount of the monthly payment, the number of years until its paid off, the interest rate, fees, and whether or not a penalty is accessed if you pay off the loan earlywill provide insight into the various costs. Conversations with your prospective lender or mortgage broker, and a review of the good faith estimate the lender provides, will enable you to make a reasonable comparison.
The good faith estimate is a legally mandated document designed to protect borrowers by requiring lenders to provide standardized disclosure of the costs associated with a loan. This written estimate details the fees you will be required to pay at closing, including the cost for all points, processing, legal fees, and filing and closing fees.
While the law does not dictate the price that each lender charges for the various services it offers, the good faith estimate does provide a useful tool for comparison shopping. One loan provider may charge more for legal fees and less for filing fees. Another may have lower overall fees but charge a higher interest rate. Using a mortgage calculator is a good resource to budget these costs.
A careful review of good faith estimates from the lenders you are considering will help you find the best deal.
A small difference in your interest rate can add up to huge savings over the term of your mortgage.
Recommended Reading: Chase Recast
How Do I Choose The Best Mortgage Lender
Choosing the best mortgage lender isnt always about the best rates and costs. In some cases, the best mortgage lender for you may:
- Have the experience to handle tough credit issues. Some mortgage banks specialize in mortgages for borrowers with scores as low as 500, or with recent major credit issues like bankruptcies or foreclosures.
- Offer special programs that bypass standard income documents. If your earnings are hard to document on tax returns, check out lenders that offer non-QM loans that allow you to provide bank statements to verify your income instead.
- Give you extra financial incentives if you also bank with them. Some banks and credit unions offer discounts on your mortgage closing costs if you already bank with them.
Min Read: How To Find Your Top Mortgage Deal
If you understand mortgages and just want to find a deal, we’ve the key links here in this one-minute read, or read the full guide for more help on this. But if you need to brush up on the mortgage basics, such as what an LTV is or how credit scoring works, read our Remortgage or First-time Buyer guides.
1. Benchmark YOUR top deal in two minutes. Use our Mortgage Comparison tool to see what’s out there for your situation, including those deals that are only available directly from lenders.
2. Then use a broker to help match you with the best deals you’ll be accepted for, including those exclusive to brokers. They often have access to special deals that aren’t directly available to customers, plus they’ll know which lenders are most likely to lend to you. Here’s a list of some top brokers :
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Understand The Different Types Of Mortgage Lenders
The type of lender you choose will determine the loan offers available to you, what youll pay for your loan and the kind of customer service you can expect to receive. Its a good idea to comparison shop, so after you learn about the different types of lenders, you can use our list of the best mortgage lenders to find the best mortgage rates, fees and closing times before settling on a lender.
Direct lenders
Direct lenders work directly with homeowners to originate and underwrite loan products with their own funds. Many retail lenders fall under this category, as they don’t involve third parties or middlemen in the mortgage loan origination process.
The advantages of choosing a direct lender include more centralized communication, quicker application and approval turnaround time, and that these types of lenders either actually own the funds you are borrowing or borrow them elsewhere.
Examples: Bank of America, Chase Bank, Wells Fargo
Mortgage brokers
Mortgage brokers are licensed professionals that work with clients to improve their chances of approval, seek out the best deals for them, and function as intermediaries between lenders and borrowers. These don’t lend money directly and are usually paid after a loan is closed.
Because mortgage brokers have access to multiple lenders, they are a good choice for nontraditional borrowers self-employed individuals, low-credit borrowers, non-W-2 borrowers who may need more mortgage term options to find the best loan.
New American Funding: Nmls#6606
Min. Credit Score
Min. Down Payment
New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
View details
View details
Why we like it
Good for: borrowers who need to be evaluated on the basis of nontraditional credit and those interested in various down payment assistance programs.
Pros
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Uses manual underwriting to evaluate creditworthiness, in some cases.
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Offers full online mortgage application, rate quotes, document upload and loan tracking.
Cons
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Prioritize Researching Lender Options And Rates To Find Whats Best For You
A mortgage lender provides a loan to finance the purchase of a home. The lender will evaluate your financial circumstance and your ability to repay to determine if you meet their underwriting standards, then provide a variety of loan options with varying interest rates and terms.
One of the primary goals for buyers is to find the lowest interest rate and the best loan terms. Locking in a low interest rate is critical, but your choice of lender hugely impacts your mortgage experience.
Whats so important about interest rates? Well, the difference in savings between a 0.5% and 1.0% interest rate is significant. For example, imagine youre considering a $250,000 loan with a 30-year fixed rate mortgage. A 1% difference in interest rate could cost you an extra $53,466 in interest payments over the course of the loan!
The Consumer Financial Protection Bureau reports that nearly half of consumers dont shop around before selecting their mortgage. Since half a percentage point over your loan term can result in thousands of additional dollars in interest paid, its critical to seek out the best deal.
Once you know you can get approved, its time to decide who you want to borrow with and who will save you money. Once you know its time to get a mortgage loan, its time to decide which lender you want to borrow from, and which ones will save you money.
Whats The Down Payment Needed To Buy A House
You might assume that you need a 20% down payment to buy a house. However, in some cases, you can buy a home with as little as 3% down. Certain types of government-backed loans even allow you to get a mortgage with 0% down.
The often-quoted 20% figure has to do with avoiding private mortgage insurance , which protects your lender in the instance that you default on your loan. You can cancel your PMI on a conventional loan as soon as you build 20% equity in your home, and your lender will automatically cancel PMI as soon as you reach 22% equity in your home.
Check with your lender to find out about how much of a down payment you need to have at closing. Ask about government-backed loans and whether you qualify for a 0% down loan. Finally, ask about PMI requirements and when you can cancel PMI if youre required to have it.
Also Check: Rocket Mortgage Payment Options
Understand Loan Costs And Fees
When comparing loans, your monthly payment amount can depend on the interest rate and point mix.
Points are fees you can pay upfront to decrease your interest payments over the course of the loan. Generally, homebuyers who plan to stay in their home for a long time may want to consider buying points upfront because they will have lower overall payments over the course of the loan.
For example, if you took out a 30-year mortgage for $100,000 at 5% interest with no points, your mortgage payment would be $537 each month. Paying for points might allow you to lower that 5% interest rate.
Hypothetically, lets say you paid $2,000 for two points and decreased your interest rate from 5% to 4.5% . With a 4.5% interest rate, your monthly mortgage payments would decrease to $507. It would take you 67 months to make up the $2,000 difference, so you would have to stay in your home for nearly six years to make it worth your while.
Check whether buying points makes sense for your situation. USAA has a calculator that can help you make an informed decision, but you may also want to talk to your mortgage lender or broker to help you determine your exact point and interest rate mix.
Taking time to understand all your financing options can help you choose the right mortgage. Youll be able to better negotiate with lenders and know what to look for in a mortgage that fits your needs.
Understand The Qualification Letter The Lender Provides
As a borrower, two mortgage terms you need to understand are pre-approved and pre-qualified. These two mortgage terms can have vastly different meanings. They can be so diverse that it could end up costing you the home you love!
The difference between pre-qualification and pre-approval can be boiled down to this:
- A pre-approval is much harder to get.
- With a pre-approval, the lender will check your credit score, verify your employment, and confirm your income.
A pre-qualification, on the other hand, can be given by a lender who takes your word for the information you provide them over the phone. Nothing is verified. In other words, the document isnt worth the paper its written on.
Where it can get tricky is some lenders use these two terms synonymously. As a buyer, you need to make sure that if your lender uses the term pre-qualification that they have verified your income, employment, and credit score.
Real Estate agents and sellers will want to know you are qualified to purchase the property.
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