Before you close a purchase deal, it is smart to shop around for correct mortgage lenders. Your decision to invest in a home is great, but you have to go through a long haul. There is the ongoing mortgage payment to be made for 10 to 30 years, which needs to be considered seriously.
Before you start shopping for the right lender
There are myriad of mortgage companies that differ in many aspects like interest rate, applicable documents, terms & conditions, and customer service. You desire to partner with the right mortgage company. Below are some tips that can help you uncover a good mortgage lender.
Improve your credit score
Everyone cannot qualify for home loans. They need to fulfill certain criteria to ensure that you will repay the debt on time. Low credit score hints you are a risky borrower, so there can be high-interest rates attached. A high credit score means in-time payments, which empowers potential borrowers to negotiate better interest rates. If your score is below 580 indicate a tough time in qualifying for the majority of mortgage types.
The solution is to pay the high-interest arrears, which will lower your total debt level quickly. Lowering debts enhances the debt-to-income ratio. In this way, you can free more funds for a down payment before the start of the home buying process.
Recognize the lending scene
If you are aware of the major lending players, it will be helpful.
- Credit unions
- Mortgage bankers
- Correspondent lenders
- Savings & loans
- Mutual saving banks
Determine the mortgage type
Some mortgages have government coverage, while others fulfill requirements that need to be sold to the government-sponsored entities and there is the remaining which doesn’t fall under both these categories.
- FHA, USDA, and VA loans are government-insured. Lenders get protection if borrowers fail to pay. The down payment is low as well as the interest is reasonable and easy to qualify.
- Confirming loans are government-sponsored entities, which purchase loans on the secondary mortgage market. The borrowers will need to fulfill the set criteria for maximum loan limits and down payment needs.
- Non-confirming loans not fulfilling government guidelines cannot be easily sold. there will very limited choices for borrowers.
A pre-approval mortgage letter offers an edge when you bid against other interested home buyers. The letter means you are serious and even proves that your finances and affordability have been evaluated. Pre-approval also saves time later, as you are all prepared to make an offer.
For getting pre-approval a lender will need the following information:
- Social Security Number
- 2-years W2s and 1099s tax returns
- Investment, savings, bank and the other asset information
- Salary & employer details
- How much down payment can be made and where will the dollars come from
Get pre-approval from three to four lenders, so that comparison can be made to determine the best terms and rates.
How to compare the different lender offers?
Look at the following aspects while evaluating the offers from different lenders.
- Interest costs
- Loan fees & origination costs
- Loan term
- Variable or fixed rate
It is also crucial to look at the big picture, so focus on researching the potential lender’s reputation. the deals need to be conducted fairly right from the start!