The way you approach mortgage shopping can literally save thousands of dollars. Take time to understand the system and make educated decisions. Doing so may very well cost you less over a shorter period of time.
If I can explain any steps along the way, please ask. I’m always happy to help.
The steps to successful financing
Get pre-approved, or better yet, get a loan commitment. Don’t skip this step. Getting pre-approved is fast, easy and free. A written pre-approval means a bank pulled your credit, looked at some preliminary information you provided and did not say no. Remember it does not mean they said yes. A loan commitment includes a completed credit application and a certificate guaranteeing you a mortgage to a specified amount. With one in your pocket, you won’t waste time looking at homes you can’t afford or you may be able to afford nicer homes than the ones you are thinking of looking at.
Instead, you can invest your time shopping for the home of your dreams – and in your price range.
Examine your finances. How much can you afford to spend? See the Mortgage Calculator at the bottom of this page. While a lender will tell you how much you qualify for, it’s up to you to figure how big a payment fits into your budget. What monthly dollar amount do you feel comfortable committing to? Remember to consider related costs such as insurance and taxes, as well as interest and principle.
Consider what type of loan is best for you. Compare fixed-rate with adjustable rate mortgages. Look down the road. Where will you be in 15 years, 30 years? How long are you planning on staying in your home? This is important when deciding wheather to take a higher rate with no points or a lower rate with point. A point is generally 1% of the loan value. This is a fee the bank will charge up front to ensure they make money on the loan in case you refinance, default or sell the house before the term expires. What obligations might you have? Take those things into consideration as you choose a loan.
Check your Credit Report. A lender will run a credit report on you (it only takes a few minutes), but you’ll be ahead of the game if you acquire a copy first. You’ll know exactly what’s on it and be able to correct any inaccuracies. Get your credit report FREE here. You are entitled to receive a copy of your credit report every 12 months from all 3 credit reporting agencies for free, just click the link. www.annualcreditreport.com/cra/order?phone Here are some simple things that you can do to boost your credit score. A higher score means you are more likely to get a home loan and will pay a lower interest rate.
How to BOOST your credit score. Once you have your credit report you can see where you can make improvements. If you have any late payments listed you can call the company that placed the report and ask them to remove it. It is likely that they will if they want to keep your business. This is called a “good will adjustment”. You can also dispute the notice if it is in error or there was a mistake made which caused the late payment. Your bill pay service may have made a mistake and not gotten the payment there on time. If you have more than 5 credit cards consider cancelling the newest account first. Creditor want you to have credit cards but not so many that you could run them up to a point you will get in financial trouble. You can get extra points added to your credit score if a friend or family member adds you as an authorized user to a mature account that is in good standing. You can actually get points just like it is your account. Remember, each time you ask for credit an inquiry is posted on your report. It is bad and a red flag to creditors for you to have too many inquiries especially if they are close together. Don’t apply for a store credit card you don’t need just to save ” 10% on today’s purchase”. This is how they hook you into credit trouble you don’t need. Some Good News: You should not hurt your credit score by shopping mortgages or car loans in a 30 day period. The credit reporting agencies know that savy buyers may shop many different banks before they settle on a loan. It is for that reason that even if you shop 20 banks in a month it will be counted as one inquiry. Do not shop multiple banks for more than a month as those are counted differently. I don’t sell cars but multiple inquiries from car dealerships are counted as one also. If you have any questions on credit scores or how your credit affects your ability to get a home loan just call me at 505 496-0141.
Shop Around. When you’re ready to get a loan, explore your options. You can choose either a direct lender or a mortgage broker. A direct lender is generally a bank. A mortgage broker shops the loan to many secondary market lenders and investors for an extra fee that will be ultimately paid by you.
There are numerous places you can go to get a mortgage but be careful with whom you do business. Many can promise you a particular rate or fee structure but all too often things change at the last minute when it is often too late to change lenders. Make sure you’re in the “right hands”.
Please visit this site below to get in touch with an excellent lender that will be able to answer all your questions for free and provide you with not only excellent and reliable information but superior customer service.
A direct lender has money to lend and makes the final decision on your loan. Brokers are intermediaries who choose from many lenders. A broker may be able to help find you a loan if you have special financing needs, but he or she will also receive a percentage of what you borrow.
While you’re shopping for a loan, also look for the best loan costs. These may include:
- Interest rates
- Broker fees
- Points (each point is one percent of the amount you borrow)
- Prepayment penalties
- Loan term application fees
- Credit report fees
- Appraisal costs
Be aware. Don’t let hidden costs sneak up on you. Ask your lender for a “good faith estimate in writing. Good faith estimates are required by law to be given to you before you sign the documents for a loan. These estimates although helpful are almost always incorrect and wont reflect your actual rates and fees until you “Lock” your rate. Lenders love to give low good faith estimates to try and beat out the competition while you are shopping for the best rates but the low rate they showed you rarely shows up at closing. The annual percentage rate is your APR. You must look at the Annual Percentage Yield, APY, to compare banks. The closer the APY is to the APR the smaller the fees are and the better the total rate. If your bank offers you a 6% APR and the APY shows 6.5%, you should check on another lender. That means the bank fees are very high. Do not fall for lenders that try to trick you into borrowing from them. If they offer you a gift, bonus, free ice cream or anything else, I suggest you look elsewhere. Reputable banks can attract customers with great rates and low fees and don’t need a gimmick to get you to apply. Remember there is no such thing as a free lunch, the freebie you are getting will be rolled up into the loan somewhere and you will actually be paying for your free gift.
Apply for a loan. Gather all the documents you’ll need to verify your loan application. Lenders will want to know your job tenure, employment stability, income, assets (property, cars, bank accounts and investments) and your liabilities (auto loans, mortgages, installment loans, credit-card debt, household expenses and others).
You’ll need to provide documents such as paycheck stubs, bank account statements and tax returns. Check with your lender or broker for more information.
Lock it down. With interest rates changing daily, locking down your rate can prove a big money saver. A rate lock-in writing – guarantees you a certain rate and terms for a specified period of time. Lock in all the costs you can, including interest rates and points. And try to set the lock at the time of application, not at approval. This will protect you from rising rates.
Your lock-in period should be long enough to allow for all processing time. Most lock periods range from 15 to 60 days. Make sure to check with your lender or broker about the average time it takes them to process a loan.
Ask about Pre-payment. You can shave years off the length of your mortgage by restructuring the way you pay back your loan. Simply paying more frequently can save thousands in interest. So can making a lump payment toward the principle – or paying a little more each month. These methods are called pre-payment.
Not all loans allow for pre-payment. If you want the option, discuss it with your lender or broker.
Clear up any financial problems. Do you have credit problems or owe money to the IRS? Buying a new home may still be a possibility. Contact me to discuss some plans to get you that house of your dreams.
Remember that the Principal and Interest payment (P & I) you will see below does not include Hazard insurance, Property taxes or PMI (private mortgage insurance) These 3 things could add a few hundred dollars a month to your payment.
Owning a home is a great investment and it is key to plan your mortgage payments ahead of time. Calculate your monthly mortgage using our free calculator below.
DISCLAIMER: The information found in these calculators are to be used as a guide and is deemed reliable but not guaranteed. Please schedule an appointment today to find out more information about your loan.