Buying a home is often one of the biggest financial decisions we make in a lifetime. How can you know you’re getting the best mortgage loan for your needs? How can you ensure you’re not paying too much? Check out these market-savvy tips that may save your sanity and your bank account:
Know your credit report and work hard to keep your score high. Lenders scrutinize credit when deciding your mortgage interest rate. Before you apply, request a free copy of your credit report to ensure its accuracy - we recommend creditkarma.com or freeannualcreditreport.com. If you see any inconsistencies in your report, work to have them corrected by reaching out to creditors to make corrections. You’ll also want to follow-up with the credit reporting agencies to ensure the matters were resolved.
Expert tip: Payoff collections and revolving debt balances (credit cards) and keep your debt low. Lenders prefer that you use less than 20 percent of the credit that’s available to you (balance versus available limit) in order to reward you with the most competitive interest rates available.
Take your time when filling out the mortgage application. It’s rather dry and unexciting, yes, but the mortgage application is an important document, so ensuring its accuracy is crucial in expediting your road to approval.
Expert tip: Honesty is always the best policy. Don’t glib over past credit challenges when asked about them. Be transparent and ready to provide documentation for income, assets, and other items.
Beef up your down payment as much as you can. Putting down more money on your home purchase makes underwriting your loan more attractive to lenders and typically results in a lower interest rate to you.
Expert tip: Depending on your loan program, monetary gifts from friends and family members are often allowed. There are dollar limits, and the gift usually must be accompanied by a “gift letter,” indicating that it’s not a loan in disguise, but this is truly a gift that keeps on giving.
Ask for lender recommendations. What mortgage lenders have your friends and family members used in the past? Who does your Realtor® recommend? :) Some of the best loan officers and loan programs are discovered by referral. Make sure you take local lenders into account - there is often great agility at the local level (i.e. expedient closing ability, which often comes in handy).
Expert tip: Find a loan officer who’s a star communicator. The mortgage process can be tedious and time-consuming, but a professional that keeps you informed through thick and thin is worth his or her weight in gold.
Look beyond the interest rate. Sure, the interest rate is important to consider, however, many other cost factors are involved in a mortgage. Evaluate the overall fees, including points, origination fees and everything you see on the Good Faith Estimate.
Expert tip: Don’t be afraid to price compare - lenders may be able to trim costs to win your business. If you receive multiple quotes from mortgage lenders, ask these lenders to match or beat one another’s Good Faith Estimate. In this scenario, you’re able to compare “apples to apples” between lenders because the Good Faith Estimate is an industry standard, placing loan costs in a uniform language.
Still have questions or need a recommendation for an outstanding mortgage lender? Give us a call at (512) 523-5663. We're always here and we're happy to help.