Its The Most Important Decision Besides Choosing Your Home
Terri Williams is an expert in mortgages, real estate, and home buying. As a journalist she’s covered the “homes” corner of personal finance for more than a decade, with bylines in scores of publications, including Realtor.com, Bob Vila, Yahoo, Time/Next Advisor, The San Francisco Chronicle, Real Homes, and Apartment Therapy.
Aside from deciding on a home, choosing your mortgage lender may be one of your most important homebuying decisions. Thats because your home is most likely the largest purchase youll ever make, and the lender can determine everything from your interest rate to the various fees youll have to pay.
Heres what you need to know about choosing the right mortgage lender for you.
Applying For An Fha Loan With Multiple Lenders
If you are applying for an FHA mortgage loan, something that happens early on the process is that an FHA case number is assigned.
FHA case numbers go into a nationwide database known as FHA Connection. Most lenders will be less than thrilled to find out via the FHA Connection that youre double-apping.
No one can fault you for wanting to get the best deal. They may, however, get their feelings hurt if they feel as though youre trying to be sneaky.
Being forthright about your intentions lets all parties know your objectives, and youll be more likely to get a better deal.
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. And, make sure you find out how much money youll need to hold in escrow.
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Tips To Find The Best Online Mortgage Lenders
So you need a home loan or want to refinance and decided to use an online mortgage company.
In This Article
Great! They usually have the lowest mortgage rates and have a wider variety of loan programs.
But with so many, how do you go about finding the best lenders to work with?
Find the best online lenders with work using these 8 expert tips.
Current Mortgage Rates
Comparison Shopping For The Best Lenders
The question is, how do you find the time to apply with multiple lenders? Its not a quick, simple process, requiring 150+ pages per paper application. You have to go through multiple steps with each lender and submit a lot of information to obtain a quote. It takes time, organization, and patience.
Is there an easier way? Is there a site like kayak.com for mortgage lenders, instead of flights and vacations?
There is! With Stem Lending, you enter your information just once, then receive multiple mortgage offers at the click of a button. Comparing and shopping for home loans has never been easier. Weigh your options side-by-side and get help from one of our personal mortgage experts when you need it. Our team is committed to helping you shop for, choose, and close your mortgage with confidence and clarity.
If you have any additional questions, please give us a call at , or email us at . We look forward to hearing from you.
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Which Type Of Mortgage Do You Offer
There are two major categories of mortgage loans: conventional loans and government-backed loans.
- Conventional loans are open to anyone, and lenders can set their own standards when it comes to down payment and credit score requirements.
- Government-backed loans are less risky for lenders, so they have lower down payment and credit requirements. Government-backed loans are insured by the federal government, which means that if you have trouble keeping up with your monthly payments, the government will help you to try to prevent foreclosure. However, you need to meet certain standards to qualify for government-backed loans. For example, you need to meet U.S. Armed Forces service requirements to obtain a VA loan, and you must live in a rural area to get a USDA loan.
Not every lender is legally qualified to offer both conventional and government-backed loans. So, ask your mortgage lender which types of loans they offer. They should be able to explain the different requirements for each government-backed loan.
How To Shop For A Mortgage Compare Mortgage Quotes
Researchers from Stanford University, HUD, Fannie Mae, the Consumer Financial Protection Bureau and others conclude that mortgage rates are very important to consumers. And yet, many borrowers don’t do the single most important thing they to get the best mortgage available to them — shop.
On any given day, mortgage rates typically vary by 0.25 to 0.5 percent between mortgage lenders for the same borrower.
To get the best deal, its important to shop and compare mortgage quotes from several competing mortgage lenders. In fact, Stanford researchers find that it takes at least four quotes to maximize your savings a 2018 study by Freddie Mac suggests these savings could total nearly $4,000. Still, about half of all borrowers look at only one or possibly two quotes before committing to a lender.
That’s potentially leaving money on the table. Here’s how to avoid doing that.
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Bonus: Lock In Your Rate
Once youve found a great mortgage rate, consider locking it in. A mortgage rate lock is a guarantee from your lender that your interest rate wont rise for a specified period.
Since mortgage rates can change by the day and even the hour, a rate lock protects you from fluctuations in the market.
If you lock and then rates increase, you still get to keep your low mortgage rate. But the opposite is true, too. If rates drop, then you may miss out on the lower rate.
Check mortgage rates:
Know The Different Types Of Lenders
As a first-time homebuyer, it can be very confusing to understand all the different mortgage companies and lenders.
- Correspondent lender: Correspondent lenders are local mortgage companies or online lenders that initially offers the mortgage loan before selling it to a larger bank.
- Credit unions, unlike banks, are less focused on the bottom line and more focused on the community and relationships. If there is a local credit union, become a member, and ask about their loan programs.
- Mortgage bankers: A mortgage banker or mortgage broker is an independent company that writes loans and puts together loan files for large lenders, banks, and direct lenders.
- Direct Lender: A direct lender is the actual financial institution offering the loan, such as Wells Fargo or Bank of America. You work with a loan officer that is an employee of the direct lender, no middlemen.
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How To Shop For A Mortgage: Key Takeaways
Shopping for a mortgage is almost guaranteed to save you money because all lenders offer different rates to different borrowers. And if you know what youre doing, it doesnt have to be difficult or time-consuming.
Here are the 5 main things you should know about shopping for a mortgage:
This involves a little more work than just comparing advertised rates online. But its worth it. Putting in a few hours of effort could save you thousands so why wouldnt you?
How Do You Compare Mortgages
You may be able to plug your numbers into an online mortgage loan comparison calculator to help you see the differences between loans. Lets suppose that youre considering a 15-year loan vs. a 30-year loan when mortgage shopping.
If you elect to go with a 15-year loan, the total cost of the loan can be reduced by tens of thousands of dollars. Youll pay more each month, but the benefits can be many. In addition to the savings, youll also have paid off your home in half the time.
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Know Your Credit Score
Your credit score is one of the main factors lenders look at when deciding whether or not to approve a home loan. You can get your credit scores for free from and . While these are just consumer scores, the scores lenders see will be different. It will at least give you a good idea of where your scores are.
Knowing your credit scores is important when choosing which lenders to contact. If you have scores on the lower end, such as 580 or 600, you need to speak to lenders who work with lower credit scores.
Learn More About Choosing A Mortgage Lender
Asking your lender a handful of questions ahead of time can help make purchasing a home easier and less stressful for you. Make sure you ask your mortgage lender or broker plenty of questions about income requirements, the types of loans you qualify for and how much you have to save for a down payment and closing costs.
Get started today by connecting with one of our mortgage specialists. Theyre ready to answer your questions and help you find the right loan.
Get approved to buy a home.
Rocket Mortgage® lets you get to house hunting sooner.
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The Buying A Home Process In 15 Seconds
Buying a home involves many steps, and getting a mortgage is no exception. But before you commit to the long process, youll want to make sure you know what youve started, and who will be there with you.
Because mortgages are so complicated, youll be creating a relationship with whoever you decide to finance with. And relationships arent something you want to go into blindly.
Maintaining Mortgage Lender Relationships
Maintaining a strong work relationship with your lenders is key to a brokers success. In a perfect world, a broker would send an equal amount of business to each of their lenders. In reality, those relationships ebb and flow, which is why maintaining them is so important.
For Einhorn, the key is transparency.
I think its important for brokers to work with lenders and provide feedback when processes dont go well, Einhorn said. So, when were trying out a new lender I am always extremely transparent with the lender if something goes wrong.
That transparency extends to his everyday lender partners as well. Lenders will often call and ask why they are not receiving more loans from Einhorns company. In response, he sends them statistics on how much of his business that lender receives.
He will also highlight specific parts of the processes where he had issues with the lenders service. From there, he gives the lender the chance to win back his business, but that lender will likely receive long-term finance until they earn back his trust.
McKay is also very transparent with his lender partners. He sends the majority of his loans to three lenders with a few others lenders receiving the rest of his loans. Similar to Einhorn, he is very upfront with how much business his lenders can expect. Communicating realistic expectations to your lender partners is important in building a relationship from scratch.
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Shop Around For The Best Rates
It’s always ideal to shop around with mortgage lenders or brokers to get the best rates. This will require multiple lenders to access your credit report, which results in many credit pulls. However, most credit scoring models will group all the hard inquiries related to mortgages into one if you shop within a period of a couple of weeks.
If you’re still not getting the rates you want, consider using a mortgage broker. They will shop your information around to a network of lenders who may be able to offer you more favorable loan terms. You may also secure a more competitive interest rate by providing a larger down payment.
Consider Their Mortgage Preapproval Process
Credit is not the only thing home buyers should verify. Theyll need to get prequalified or preapproved by their lender.
Prequalification means you have provided income and basic information about your debts to the lender, who responds by telling you how large of a loan you can expect to be approved for.
Preapproval means that youve submitted financial information to a lender who then verifies additional factors like income, runs a credit history, and calculates your debt-to-income ratio. In general, youll need a preapproval letter attached to any offer you make on a home.
At Rocket Mortgage, we offer Prequalified Approval, the first step in the new Power Buying Process. This gives borrowers a good idea of how much home a home buyer can afford. We verify a home buyers credit score by pulling their three-digit FICO® Score and report. We ask prospective borrowers for a verbal verification of income and assets and determine the debt-to-income ratio.
To make an offer, though, prospective home buyers will need a Verified Approval,1 the next step in the Power Buying Process, where a home buyer submits documentation of income and asset statements in order to get a Verified Approval Letter. This process can be completed within 24 hours.
In essence, prospective home buyers should consider what a lender offers by means of a preapproval when shopping for a mortgage. It could be the difference in locking in the best interest rate and monthly mortgage payment.
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The Mortgage Credit Pull Window
The mortgage credit pull window is a grace period where multiple mortgage applications are believed to only count against your credit score as a single hard inquiry. The window is thought to be between 7 and 45 days.
Although the mortgage credit pull window isnt an official rule straight from the credit bureaus, its a reliable guideline you can trust. Typically when a borrower is shopping and we pull their credit, its close to, if not exactly the same as what they saw from other lenders.
How To Shop For A Mortgage Without Hurting Your Credit Score
If you’re seeking the best mortgage rates, shop carefully or your credit score might suffer. Each time you apply for a home loan, a mortgage lender will make a credit inquiry to review your credit history. These inquiries are reported to the three major credit bureaus: Equifax, Experian and TransUnion.
Because inquiries signal that you are thinking of taking on new debt, your credit score can dip. But the good news is that these steps can reduce the risk of damaging your score:
— Check your credit report. Knowing your score before you shop can help you spot and then correct errors that may have caused an unjustified drop in your credit score.
— Shop for a mortgage within a 45-day window. In most cases, your credit score will not be hurt if you stick to this rule.
— Prequalify for a mortgage. The lender uses a soft pull instead of a credit-damaging hard pull to produce a snapshot of how much you might be able to borrow.
— Limit other borrowing activity. New debt can hurt your credit score, which in turn can make your mortgage more expensive.
— Pay your bills on time. Missing payments is a surefire way to lower your credit score.
Here is more about how to shop for a mortgage without hurting your .
Check Your Credit Report
Before you begin shopping for a mortgage, look at your credit report from each of the bureaus. Fortunately, checking your own credit report does not damage your credit score.
— Account balances. Review your reports for incorrect balances or .
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Drawbacks Of Applying To Multiple Lenders
For a lender to approve your mortgage application and make an offer, it has to review your credit report. To do so, it makes a credit inquiry with the three major bureaus.
Credit analysts note that too many inquiries can lower your numerical . Most scoring models, such as FICO and VantageScore, make inquiries into your credit account. These models are closely guarded, so few people know the exact extent to which inquiries matter. Fair Isaac Corp. , the creator of the FICO model, states that multiple mortgage inquiries that occur within 30 days of one another do not affect your FICO score.
Another nefarious secret that many borrowers do not know is that credit bureaus make additional revenue by selling your information to mortgage lenders to which you have not applied. This is known in industry parlance as a trigger lead. Submitting a mortgage application triggers a credit pull, and mortgage companies pay the credit bureaus for lists of people whose credit was recently pulled by mortgage companies.
Knowing that these people seek mortgages, the companies’ salespeople call down the list and pitch their services. The more lenders you apply with, the more likely it is that your information will be sold as a trigger lead, which can lead to a barrage of sales calls.
Home Loan Shopping: Apply To Multiple Mortgage Lenders
The mortgage marketplace is tight. While many borrowers are just happy to get approved, there’s nothing stopping you from applying to a variety of different mortgage banks for your loan.
Consumers don’t think twice about shopping around for common household goods. Don’t think twice about approaching a mortgage lender in the same fashion. In your quest to find mortgage rates that work for your personal situation, don’t be shy about shopping around. Look at different mortgage banks, and apply for the best offers. It’s a great way to comparison shop, provided that you don’t commit to any expensive fees.
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