Buying a house? Your home loan is a product, just like your car insurance. Here’s how to shop for your mortgage to get the best deal for your money.
How to Avoid Overpaying for Your Mortgage!
Start by treating your home loan like you would any other product that you buy. If your bank sold cars, would you buy one even though the price was higher than a dealership? Of course not.
You need a mortgage lender who specializes in making home loans, and in most cases, your local banker won’t have that experience and expertise. They’ll just try to finance your house based on their own internal processes, which often include higher fees and limited options.
The same goes for your real estate agent. They don’t have loan expertise, and are more likely to refer you to a lender with whom they have a relationship, in hopes of a kickback. Brokers also are a poor choice, as they advertise low rates but can completely fail you when it comes to communication and customer service. You could also be badly startled by the actual cost when all their fees are added on.
Look at it this way. The difference of one interest point can cost you as much as a sixth of your total purchase price on your new home! You wouldn’t pay 15% more for a car without a very good reason, and you shouldn’t do it for a home loan either.
Shopping Around for Your Mortgage
Working with professional, experienced Loan Officers (LOs) is your first step. They will be motivated to help you find the best loan product possible, because they depend on you to tell your friends and family about your positive experience.
A dedicated mortgage bank is often the best option for finding a dedicated LO who will be focused on helping you navigate the home loan process from start to finish and will even be there for you after the fact if you have questions. When choosing a mortgage banks, find out if they have online tools and technology to streamline and demystify the loan application process.
The 12 Things You Should Ask
Ask your LO about these 12 things when getting a loan quote. You can compare answers from multiple banks and determine which one is best for you.
- What types of loan programs do you offer?
- For my specific situation, what is the base interest rate (without points?)
- Do you offer points, and if so what are the terms and costs?
- What additional fees do you charge, and can I negotiate any of these fees away?
- What are your lender credit options?
- How much will my closing costs be?
- How much of a down payment do you require?
- Will I have to pay private mortgage insurance (PMI)?
- When and how can I lock my rate, and do you charge?
- What is the typical range for a closing date from the date I make an offer?
- What is your preapproval process?
You also want to check rates online from multiple sources to see if your lender is being transparent. Negotiate as many fees as you can to get a better deal, and try to get the lender to help with closing costs. Make sure you track rates even more closely as you approach time to lock your rate to make sure they don’t hike the rate when they shouldn’t.
Finally, before you start the loan application process, you need to make sure you don’t have any nasty surprises hiding in your credit report. Check your score and pull your reports to look for any issues.
Shopping for a mortgage shouldn’t be a harrowing experience. Don’t get caught up with a lender who doesn’t communicate, and don’t pay more than you should.
View loan limits in your area
Rates & Money is your go-to destination for free information about mortgages. Our home buyer guides and home loan articles are designed to help you make informed decisions when buying a homeView