5 Tips for Mortgage Shopping
Shopping for a home mortgage is one of the most important steps in the home buying process, but many homebuyers neglect to do it. This often results in hard earned money being left on the table and paying more fees or closing costs than necessary. If you are starting your home search or want to learn more about the process, here are 5 tips for mortgage shopping:
1. Get the process started early:
Going to look for homes before you have been preapproved is like going on vacation with no luggage. Without a preapproval you will not know the true cost of buying any home as closing costs and fees will vary. Most importantly, a preapproval will allow you to see the entirety of what your monthly payment will be including mortgage, interest, property taxes, home insurance, PMI and HOA fees. I advise my clients to start 3-6 months ahead of their anticipated purchase to give them ample time to shop. If you have any issues getting approved, this will also allow you remedy any issues.
2. Inquire with a few lenders:
Many homebuyers will start their mortgage shopping with their bank or credit union. This can be a good place to start, but in my experience, many banks have delayed closing timelines and terrible communication. Local mortgage lenders will have a larger pool of programs to choose from and can help tailor a loan that is best suited for your situation. A trusted realtor can help find mortgage lender referrals as they work day in and day out with them. Read online reviews and ask your friends and family for referrals as well. Most importantly, reach out to a few to compare and contrast the programs they are offering. Shopping various lenders will not hurt your credit score.
3. Don’t get hung up on interest rates:
There are more fees and costs associated with obtaining a mortgage than just the interest rate. Yes, interest rates affect your monthly payment and should be shopped, but there are other fees that can quickly add on to the cost of a loan. Ask about closing costs, PMI, and other fees charged by the lender. Fees from banks or credit unions often have lower fees, but they can’t offer you hundreds of different loan programs. Interest rates are certainly important, but it isn’t the only item you should shop.
4. Consider factors that help determine what interest rate you qualify for.
Interest rates will be determined based on a few factors such as down payment, loan to value ratio, your debt to income ratio and your credit score. Interest rates will also vary based on the type of property you are purchasing such as a primary residence or investment property. FHA, VA and USDA loans can also be considered if you meet qualifications.
5. Questions to ask lenders while shopping:
1. What programs are available based on my situation?
2. What do you need for preapproval?
3. What is your communication during the process like?
4. Have you worked with a buyer like me before?
5. Can you provide me with a comprehensive list of all costs associated with obtaining this loan?
Many factors go into obtaining the best mortgage, but the more you understand the process, the better you will feel once you start shopping. Interested in getting the home buying process started? Let’s connect!