Monday, March 18, 2024

Should I Shop For Mortgage Lenders

Don't Miss

How Long Does The Preapproval Process Take

How many mortgage lenders should I apply to?

The mortgage preapproval process can take anywhere from one to three business days after submitting your application. But after that hard work is done and you get approved, youll have a valuable letter from your lender stating youve been given a green light to purchase a home.

The letter will usually contain a price cap and a deadline, valid anywhere from 60 to 90 days, but typically youll have around a 45 day shopping window for mortgages. You may be able to extend that window with an additional re-verification by the lender.

Golden 1 Credit Union: Nmls#669333

Min. credit score

Golden 1 offers conventional loans with as little as 3% down.

View details

View details

Why we like it

Golden 1 offers a cost-saving real estate agent program, plus a range of loan types, including jumbos.

Pros

  • Offers a variety of purchase and refinance loans, including jumbo mortgages.

  • Has a preferred real estate agent program that can save a borrower some money on closing costs.

  • Offers some flexibility on guidelines for loan qualification.

Cons

  • Does not offer VA or USDA loans.

  • Products available only to California residents.

Figure Out What You Can Afford

To effectively do your rate shopping, you’ll need to know how much of a mortgage to ask for. Use a mortgage calculator to crunch the numbers and see how much house you can really afford. You can put in various loan amounts and mortgage rates to run different scenarios. Your monthly payment will also depend on your loan term, which is the length of time you’ll take to repay the loan.

Read Also: How To Qualify For The Lowest Mortgage Rate

The Difference Between Aprs And Interest Rates

Your annual percentage rate is disclosed on Page 3 of your loan estimate, and reflects the total cost of getting a mortgage and is different from the interest rate. Generally speaking, the bigger the difference between your APR and interest rate, the more youre paying in closing costs. However, its still a good idea to compare the itemized costs on the loan estimate to make sure youre getting the best deal.

New American Funding: Nmls#6606

American Liberty Mortgage should be the first call you make when ...

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

  • Uses manual underwriting to evaluate creditworthiness, in some cases.

  • Offers full online mortgage application, rate quotes, document upload and loan tracking.

Cons

Min. credit score

NASB offers conventional loans for as little as 3% down.

View details

NASB couples competitive mortgage rates and reasonable fees with a good assortment of loan options.

Pros

  • Offers competitive rates and origination fees.

  • Considers nontraditional income sources, in some cases.

Cons

  • Does not offer home improvement mortgages.

  • Doesn’t offer home equity loans and lines of credit.

Min. credit score

Better offers 3% down payments on conventional loans.

View details

Good for: tech-savvy borrowers who prefer an online experience.

Pros

  • An online process with human help as needed.

  • Makes it easy to see customized mortgage rates.

  • Offers an “underwriter reviewed” preapproval letter in as little as 24 hours.

  • Appraisal guarantee promises the loan wont change even if appraisal is lower than expected.

Cons

Min. credit score

View details

Pros

Cons

Min. credit score

You May Like: What Is The Max Debt To Income Ratio For Mortgage

How To Shop For A Mortgage In 6 Steps

Editorial Note: The content of this article is based on the authors opinions and recommendations alone. It may not have been reviewed, commissioned or otherwise endorsed by any of our network partners.

If youre thinking about buying a home and need a loan, knowing how to shop for a mortgage is a must. Before you start applying online or calling local lenders, follow these shopping tips to make sure you pick a mortgage thats a good fit for your finances.

Use Your Mortgage Quotes To Negotiate

Keep in mind that the mortgage quotes you get are not set in stone. Mortgage lenders have the flexibility to adjust their fees and even their interest rates. That means you can often use competing offers as leverage to negotiate your costs.

Dont hesitate to play one lender off against another:

I like your company, but Ive got a quote here with a lower rate or less expensive closing costs. Can you match it? Better yet, can you beat it?

Chances are, these negotiations wont lower your rate by much. But, when youre borrowing huge amounts over decades, even a tiny drop in your rate can add up to hundreds or even thousands. And what do you have to lose?

You May Like: How Long Do You Have To Pay Mortgage

Create A Shortlist Of Mortgage Lenders

Tap your social network about how they chose their mortgage lender, whether itâs family, friends or coworkers. If youâre working with a real estate agent, they might also recommend lenders that they have worked with, and those that might not be the best fit.

Be sure to ask everyone you consult why they chose a particular lender. For example, it could be because of a good experience with a specific loan officer. Make sure their reasons match up with your criteria so you donât waste your time with lenders that are not right for you.

Do You Offer A Mortgage Rate Lock

How To Shop For A Mortgage And WIN

A mortgage rate lock is an agreement between you and your lender that says your interest rate will stay the same until closing, regardless of market movements. Rate locks are important because they keep your loan costs predictable. When you get a rate lock, you dont have to stress about finding a home immediately, because you know that your interest rate wont increase.

Ask your lender about rate locks and how long theyre valid. Also, find out about current market rates and whether you should lock your rate. Some lenders will drop your interest rate if market rates decrease after you lock your rate, so be sure to check with your mortgage lender.

Take the first step toward the right mortgage.

Apply online for expert recommendations with real interest rates and payments.

Don’t Miss: Are Reverse Mortgages Good For Seniors

Check Your Credit Score And Report

When you apply for a mortgage, lenders review your FICO® Scores and the information in your credit reports, often from all three of the national credit bureaus: Experian, TransUnion and Equifax. For single borrowers, the lender typically orders scores from lowest to highest and uses the middle score to assess eligibility for a mortgage loan. To illustrate, if you have scores of 620, 650 and 690, the lender will typically use 650 to make a lending decision. When two people are getting a mortgage together, the lender looks at the lower middle score of the two.

Here are the general credit score guidelines by loan type:

  • Conventional loans: FICO® Score of 620 or higher
  • FHA loans: FICO® Score of at least 580
  • VA loans: FICO® Score of 620 or higher
  • USDA loans: FICO® Score of 640 or higher

Knowing where your credit stands before you move forward can help you set realistic expectations. If you find your credit scores aren’t as high enough to qualify you for a mortgage, you might take the time to improve your score to give yourself the best chance of getting approved.

You can get your by continuing to pay your bills on time, paying down your credit card balances and avoiding new credit applications.

Fixed Vs Adjustable Rates

The fixed-rate mortgage is the most popular home loan type. It gives homeowners a stable principal and interest payment that never changes for the term of the loan. The most common fixed-rate loan terms are 10, 15, 20, 25 and 30 years.

Adjustable-rate mortgages offer a temporary low rate for a set time period ranging between one and 10 years, and then adjust based on the margin and index tied to the ARM program you choose. For example, with a 5/1 ARM, your rate is fixed for the first five years, and then adjusts every year for the remainder of the loan term. Make sure you review the caps with ARMs so you know how much the interest rate and payment could go up over time.

Recommended Reading: How To Make Bi Monthly Mortgage Payments

Are Down Payment Assistance Programs Available

Military veterans and first-time homebuyers may be eligible for special government-sponsored mortgage programs. Veterans and active service members can apply for a VA loan, which generally has a lower interest rate and doesnt require a down payment. And if you have a lower credit score and limited savings, a Federal Housing Administration loan could be an option. Ask your lender what you might qualify for.

Why You Can Trust Bankrate

Wholesale Mortgage Rates Scottsdale

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.

Read Also: Why Do Banks Need Bank Statements For A Mortgage

How To Choose The Right Mortgage Type For You

The table below gives you a quick reference to compare the benefits of each mortgage type.

Loan type
You want a predictable monthly payment that wont change over time
Adjustable-rate mortgage You need a lower payment for a short period, and plan to sell or refinance the loan before the adjustable-rate period starts
Long-term fixed rate You want the lowest payment possible or are applying for a large loan amount
Short-term fixed rate You want to pay off your loan faster and can afford the higher monthly payment

Refrain From Applying For New Credit

You want to try not to apply for new credit while you shop around for a mortgage. New credit only makes up around 10% of your scores, but if you want the best rates possible, you’ll put yourself at the best advantage if you don’t open up a lot of new credit while you look for a new home.

For example, a new credit card application will trigger a hard inquiry, reducing your credit score a few points.

This might not seem like a big deal, but what if your scores hover close to the 620 range? It could affect your lender’s decision to grant you a mortgage. Furthermore, inquiries stay on your credit reports for 2 years. However, FICO® only considers credit history and inquiries from the past 12 months. Based on this information, you may want to avoid getting new credit a full year prior to shopping around for a mortgage.

The age of your accounts also gets taken into consideration. In other words, you’d rather have had a credit card for 5 years versus 5 weeks as you shop around for your mortgage.

Recommended Reading: Can I Buy A Second House With A Mortgage

Dont Make Any Big Life Changes

Try to avoid changing jobs or becoming unemployed, if at all possible. And dont open or close any credit accounts. Any of the last three could reduce your credit score. Also, dont make any large purchases on open credit lines, adds Meyer.

Keep in mind that lenders routinely recheck your credit history just before closing. So you dont want to do anything that will jeopardize your savings, mortgage rate, or worst case your entire mortgage approval.

What Is A Good Credit Score For A Mortgage

TIP: Shopping for mortgage rates matters!

If youve got bad credit and your credit score is under 580, you may want to work on improving that score by paying down your credit cards and debt before you start shopping for a mortgage. Some lenders may not be willing to lend to you. Likewise, if your score is above 580, youre more likely to meet the minimum qualifications for lending. A good credit score for a mortgage is between 700 and 749.

Read Also: Can You Use A Mortgage To Build A House

Dont Use The Aprc To Compare Its Mostly Meaningless

All lenders have to tell you their APRC the effective averaged annual interest rate if you held your mortgage for the entire term . This is rather annoying, as its a rate that in most cases youll never have to pay, so its meaningless.

If you had a fixed rate at 3.49% for two years, and then the rate it reverted to afterwards was 4.74%, the APRC would be around 4.3%.

So why do we say its mostly meaningless?

  • You never pay 4.3%. Its an averaged rate over the entire term
  • Youre likely to remortgage long before the term ends
  • The rate it reverts to is likely to move anyway

What you really need to focus on is the initial rate, the fees and the rate it goes to once your deal has ended. For further reading, see Martins Why mortgage APRCs are meaningless blog.

Mortgage Rate Shopping Doesnt Take Long

When you find a house you want to buy, your impulse may be to move quickly to lock in a mortgage rate especially in a competitive market.

The same goes for refinancers who want to score ultra-low mortgage rates before theyre gone.

But you dont want to move so fast that you end up with a bad deal. Even a slightly higher rate can add thousands of dollars in interest over a 15- or 30-year loan term.

Theres always time to explore your options, even if the clock is ticking. Heres how.

In this article

Don’t Miss: How Much Of Your Monthly Salary Should Go To Mortgage

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.

Get Quotes From Multiple Lenders

Mortgage Broker Fees Explained: Home Loans 101

Most experts recommend getting at least three rate quotes when you shop for a mortgage. But theres no limit to the number of mortgage companies you can apply with. And research suggests that the more quotes you get, the more money youll save.

For example, Freddie Mac found that borrowers could save an average of $1,500 over the life of the loan by getting one additional rate quote and an average of about $3,000 for five quotes.

You should get at least 3-5 mortgage quotes when shopping for a home loan. The more quotes you get, the more youre likely to save.

The good news is that most lenders have a similar application process. Youll need to provide the same types of documents and answer the same types of questions every time you get a rate quote.

So after youve applied once, youll already have all the information you need on hand to apply with a few more lenders. And with most lenders offering online preapproval applications these days, the process can be pretty quick and painless.

Keep in mind that a quote is just that, and nothing is guaranteed until you are locked in, reminds Jon Meyer, The Mortgage Reports loan expert and licensed MLO. But quotes should help you gauge the market, lender to lender.

Read Also: How Does A Retired Person Qualify For A Mortgage

Does Shopping Around For A Mortgage Hurt Your Credit

You might have already asked, “Will shopping for a mortgage hurt my credit?” prior to stumbling on this article. If so, good for you! You know you need to protect your credit at all costs.

You can rest easy knowing that you can shop around for a mortgage without hurting your credit. In fact, you can consult as many lenders as you want as long as your last credit check occurs within 14 days of the first credit check. Optimal shopping period time frames are built around FICO® scoring models. FICO® gives you a 14-day grace period for mortgages when they go into one inquiry. In other words, FICO® treats similar loan-related inquiries within 14 days of each other as a single inquiry.

For example, let’s say you shopped for a mortgage with five different lenders over a period of 14 days. FICO® would consider those five hard inquiries as one hard inquiry. A hard inquiry could lower your credit score by a few points. On the other hand, soft credit inquiries won’t affect your score.

You might wonder what would happen to your credit score if you shopped beyond the 14-day time frame. After 14 days, new mortgage quotes will add a soft inquiry to your credit report. Try to avoid adding these inquiries to your credit report and do your shopping within the 14-day window.

More articles

Popular Articles