Getting pre-approved for a mortgage is recommended before you begin looking for a house and it’s a process that’s easier than you might think. A mortgage consultant can help you compare loans to get an estimate of the amount you are eligible to borrow, your monthly payments, and your interest rate.
So, you can have a clear understanding of your budget, and at the same time, you can gain a competitive advantage, getting one step closer to homeownership.
But where do you begin? Well, finding the right lender ultimately comes down to asking the right questions. The answers you receive can help determine whether or not you’re getting the best value.
Here are a few ideas to get you started.
1. Start early
There are a few things you can do as you explore the idea of homeownership. After all, home buying and the mortgage process really happens fast once you’re under contract on your dream home. So the earlier you start, the better.
A critical first step would be to get your credit report, so you can work on your credit score if it needs a little boost. As your credit increases, your interest rate can be more competitive — offering you even more savings.
2. Ask the right questions
You’ll want to know about upfront costs and hidden fees, so be sure to ask if they charge anything out of pocket. Some banks charge application or pre-qualification fees, which may be due at the beginning of the mortgage process.
It’s also helpful to know if they do everything in house, or if they outsource. If possible, choose a lender that has in-house underwriting, so they have more control over your loan, and you can close faster.
Curious what else you should be asking lenders — check out these 10 important questions.
3. Shop for rates
Mortgage rates vary greatly — from day to day and lender to lender. On average, buyers who get one additional quote will save anywhere from $966 to $2,086 over the life of their loan. For five quotes, buyers will save $2,089 to $3,904.
It’s also essential to know that your credit report will not be dinged for shopping rates, as long as you’re doing so within a 45-day period. Credit scoring companies like FICO and VantageScore will treat multiple hard mortgage inquiries as a single event, as long as you stay within the above timeframe.
4. Avoid commission-based lenders
A commission may sound harmless, but you need to understand how they work in the mortgage industry before you think they’re “no big deal.” Most mortgage commission is calculated as a percentage of the total loan amount. So it doesn’t require a lot of thought to realize that commissioned lenders “may” pressure you into a bigger loan, or even their “loan of the month.” If you choose to work with a lender that incentivizes its employees, be sure you really do your due diligence before choosing a loan program. You deserve what’s best for you, not for them.
5. Read online reviews
Advertising can be deceiving, so it’s worth an internet search to see what past customers have to say. Visit Google, Zillow, and better yet, the Better Business Bureau to review lender ratings and recent borrower comments. You can get an even better feel as to whether or not your selected lender is in it for you.
6. Start the pre-approval process
Mortgage pre-approval is an official approval noting the amount available to borrow. This includes estimated monthly payments and interest rate. It’s incredibly helpful when it comes to budgeting, so you’re not looking at homes you can’t afford. And it also provides you with leverage when it’s time to make an offer. There are no obligations attached, so you are not required to use the lender who pre-approves you. There’s still time to choose someone else if you’ve found a better deal.
The bottom line
Allow yourself enough time to strengthen your financial health and to shop for a mortgage. Comparing and negotiating loan programs may save you thousands of dollars, which can go a long way during your path to homeownership.