Eager to purchase a new home? Start by finding the best mortgage lenders in your area to help get you the best rate with the best terms. Purchasing a home comes with a major commitment. Unless you sell down the road, you can expect to be paying on a mortgage for the next 15 to 30 years. So, before you start looking for your next abode, find the best mortgage lenders and get prequalified.
Looking For A Lender
Not all mortgage lenders are the same. Many offer different types of home loans, as well as rates and fees that they will charge to seal the deal.
Before you reach out to lenders, it is important that you have your finances in order. You want to make sure that you’ll qualify and if you do, what you should expect when it comes to loan terms and rates. Research the different types of mortgages to see which will work best for your unique circumstances. Once you’ve narrowed it down, you will be able to compare lenders that offer the loans and services you will need to buy your next home. Below we will discuss 5 tips for finding the right mortgage lender.
Handling Your Finances Prior To Applying For A Home Loan
Each mortgage type and lender will have its own requirements when it comes to applicable credit scores. Buyers with higher scores will be offered more options of loan programs and generally qualify for better interest rates.
Before you shop for a home and lenders, you need to find out what your credit score is. Be sure to verify that your credit report is accurate. Many online banking systems offer free credit scores to their customers that update weekly.
AnnualCreditReport.com is mandated by the government and serves as a great resource to access free copies of your credit reports from the three major credit bureaus (TransUnion, Equifax, and Experian). Carefully review your report and be sure to dispute any mistakes.
Your next task is to figure out ways to improve your score. Make sure that you are paying all of your bills on time and prioritize paying off any credit card or loan balances you might have. As you lower your debt, you will improve your debt-to-income ratio which makes you more qualified for a home loan. Most lenders prefer their borrowers to have a debt-to-income ratio less than 36%. Bonus: after you have reduced your debt and monthly credit card payments, you will have money to start setting aside for a down payment.
Choosing The Right Mortgage
There are quite a few different mortgage loan types available to you. Each was designed to meet the unique needs of different individuals. A few examples are:
- FHA Loans: These offer reduced credit score exigencies compared to other mortgage types and have low down payment requirements.
- Conventional Loans: These are typically offered to buyers that have good credit; also offer low down payments.
- VA Loans: These are created for active and veteran military personnel. VA loans do not require borrowers to put any money down.
- USDA Loans: These loans are a great option for borrowers looking to purchase a home in rural or suburban areas. Another loan you can get without having to come up with money for a downpayment.
- Jumbo Loans: These are designed to finance expensive homes and properties that exceed the loan limits of majority conventional loans.
It is important to know that home loans can vary in length, 10, 15, and 30-year are the most common. How interest rates work on these loans can also fluctuate depending on circumstances.
If you get a fixed-rate mortgage, your interest rate will remain the same for the duration of the loan. However, with an adjustable-rate mortgage, your interest will change periodically once the initial fixed-rate period has ended.
Finding the right lender is important as what each lender has to offer can vary greatly. Some lenders are able to offer their borrowers a wide range of mortgages, while others limit themselves to certain mortgage types. After you begin to understand the options available to you, you will be able to connect with lenders that are able to fulfill your mortgage needs.
Comparing Rates Between Lenders
Do your research! Look up what the current mortgage rates are online from lenders that offer the type of mortgage loan you are seeking. Remember that these rate quotes are merely estimates and you won’t know for sure what rate you qualify for until a lender has pulled your credit information and processed your loan application. However, they can give you a good idea of what to expect. Once you have chosen a few lenders you might want to work with, submit your application. You will then be able to lock in the loan with the lender that has offered you the best loan terms.
Choosing the loan with the lowest interest rate will save you thousands of dollars. Do not be afraid to shop around! It will only benefit you.
Before you start your home search, we suggest that you apply for mortgage pre-approval with more than one lender. When you have a pre-approval letter in hand, you are showing sellers and real estate agents that you are serious and qualified to make this purchase. It also reassures all parties, including yourself, that a lender has assessed your financial situation and figured out what you are able to afford.
Making pre-approval one of the first steps in the process will save you time later. When you find a home you love, the lenders will already have your information on file so that they can move forward with processing the loan.
Here are a few things you’ll need to get pre-approved by a mortgage lender:
- Your social security number, as well the social security number of any co-borrowers
- Information pertaining to your checking, savings, and investment accounts
- Documents regarding any outstanding debt obligations, such as car loans, student loans, credit cards, personal loans– anything that you are paying monthly payments on aside from utilities
- The last two years of tax returns, W-2s, and 1099s
- Employment information and annual salary
- If you are able, how much of a downpayment you have and where you are sourcing that money from
Comparing Loan Estimates And Choosing The Right One For You
After you apply for a mortgage loan, lenders are required to provide you with a loan estimate. This estimate will include all of the important details of your loan, such as what your monthly payment would be, interest rate, fees, and anticipated closing costs.
We advise comparing estimates between at least three lenders. Be sure to match each line side-by-side so you have a clear comparison. Don’t hesitate to ask questions if you are unsure about what something means. Taking the time to do this now is the best way to save money while getting the best rate.
Dan provides clients with years of proven experience and an abundance of financing options for their mortgages. His common sense approach and devotion to customer service is what sets him apart in the highly competitive mortgage industry. Dan prides himself on consistently delivering “referable services” to his clients, referral sources, and partners.