Most inquiries about mortgage loans start with clients asking about interest rate. It makes sense that rate is the driving question because a lower mortgage rate translates to lower interest paid over the life of the loan. While this is an important question to ask, it is more important to know the type of mortgage company you are working with to ensure that you are getting the best mortgage rate. Understanding the difference between retail mortgage lenders and mortgage brokers will help you get the best mortgage rate available when you are ready to purchase a home, refinance, or consolidate debt with a cash-out mortgage loan.
A retail mortgage lender funds a mortgage loan in their name and is limited to one set of mortgage rates, and is limited by guideline overlays. A mortgage broker has access to many mortgage lenders, and can offer the lowest rate available in the market. In turn, a mortgage bank offers wholesale rates through brokers by eliminating marketing costs such as advertising and loan officer payroll expenses. The same mortgage loan programs, mortgage processing, mortgage underwriting technology, and loan servicing is available to you from major mortgage lenders but at lower rate! Read more about the advantages of choosing an independent broker, like Competitive Home Lending!
Narrow Down Your Home Loan Options
Looking for the right mortgage loan is not something you want to go into blindly. Here are a few tips to make sure you're getting what's best for you. Did you know that more than 37% of homes in the United States are mortgage-free? Paying a mortgage loan to completion is the joy of all homeowners. Yet, choosing the right mortgage is the first step towards ensuring that you’ll have a seamless journey servicing your mortgage. So, how do you choose the right mortgage loan? If it's your first time, the process of mortgage application is likely to be nerve-wracking. However, you can follow several steps to assist you in making the right decision. Here are some tips to help you get the best mortgage loan:
Confirm Your Credit Report
Your credit reports play a central role in your mortgage application. It would be great to check all your credit reports to confirm their credibility. Pull out your credit reports from Equifax, Transunion, and Experian to make a comparison. Review to check if there are any errors or misreporting, which could jeopardize your credit status. Confirm that your name, Social Security number, and address are accurate. Review the loans and credit accounts to ensure that they are well-reported. Given the increasing cases of identity theft, you need to double-check for any mysteriously opened accounts. Once you identify an error, dispute with the relevant bureau. The last thing you want in your credit report is negative items that can affect your mortgage application.
Work on Your Credit Score
Is your credit score perfect? Kudos! You’re among the 40 million American consumers who have a clean credit score. Getting the right mortgage, in this case, will be seamless as far as the credit score is concerned. Conversely, you don’t need to fret if your credit score is below the minimum. Given the several factors that impact credit scores, getting a variety of people grappling with a low score is not surprising. That doesn't mean you won't get a mortgage loan! While most traditional lenders will only consider borrowers who have a score of above 620, you can get a host of other private lenders. These alternative lenders will have a set of requirements that you'll need to fulfill for eligibility. Nonetheless, the mortgage rate will be slightly higher if you have a poor credit score.
Consider Your Overall Financial Picture
Purchasing a home is one of the investments that you can't afford to make blindly. It would help if you made a plan based on your financial situation. Be clear on the amount you're willing to spend on the mortgage from the onset. Your debt-to-income ratio is a great place to start. With a high debt status, applying for a mortgage can lead you to a more in-depth financial crunch. You can evaluate your tax returns, bank statements, and other financial returns to establish your money usage. When you take a mortgage, you'll need to make upfront costs, which can be quite high. If your financial position is shaky, paying for the costs and committing to monthly payments can be troublesome. As such, your current financial situation will determine how to go about getting a mortgage loan.
Choose the Mortgage Loan You Desire
The main mortgage loans are government-backed or conventional. Government-backed loans such as VA or FHA loans are often under the federal government. These types of loans are less risky, making them have more flexible and secure terms. Conventional mortgage lenders are either credit unions, private banks, or online lenders. The eligibility requirements for these loans are pretty strict. The down payments are also high. If you're unsure how to shop for mortgage rates and lenders, consider getting quotes from each of the lenders. Considering the variable and fixed interest rates will also help you settle for a lender with the best terms. You don't want to get stranded with your mortgage repayment halfway the journey!
Have Your Home Loan Documents Ready
Once you have your finances and have already identified the right mortgage lender, it's time for paperwork. The process of mortgage approval is quite detailed. It requires a great deal of documentation. You might need to have the documents ready before reaching out to your identified lender. Income verification papers are a must-have. You ought to prove that you can service the loan, which will mean that you provide your W-2 forms and proof of tax returns. Besides the income, you will need to show proof of assets. Your assets will be a plus in the process as they will make you more eligible for a mortgage. You need to have your bank statements, retirement accounts, and savings accounts to show your financial ability. Lenders also require you to have a list of liabilities. You might need to have documents that show any debts that you have, such as student loans and credit card balances. The documentation will play a central role in your loan approval.
Find the Right Mortgage Lender
Finding the right mortgage lender will make your home purchasing process more manageable. A mortgage application can be complex. The requirements can discourage an aspiring homeowner. However, with an exceptional credit score and the right papers, it gets easier. More importantly, research more on identified lenders and get quotes. Some rates are exorbitantly high. With the conventional and government-backed options, you shouldn’t feel limited. You can get a mortgage loan that resonates with your financial position and outlook. The mortgage lender you get will determine the kind of journey you’ll have in paying the mortgage. Apply now for the best mortgage program in Texas.
Savvy mortgage shoppers save time and money by working with a mortgage broker, but all mortgage brokers are not equal. Find out what sets Competitive Home Lending apart from other mortgage companies and feel confident with your mortgage loan.
Still not sure? Contact us and we will help you on your way to getting the low-rate home loan to fit your needs!
While credit inquires should not affect your score when you are shopping for a mortgage loan, nobody likes running their credit multiple times. You can compare lenders by requesting a fee worksheet. This does not require a credit inquiry.
Competitive Home Lending has access to wholesale mortgage rates through many national lenders. Get the same mortgage programs through a local mortgage broker offering the best mortgage loans at unbeatable rates.