Most people will need a mortgage to buy a home. That means that not only do you need to shop for a home, you need to shop for a home loan. A recent survey found that almost half of borrowers didn’t shop around before settling on a mortgage.
They should. In fact, you may find more loans to choose from than you do houses.
You should start looking for a mortgage professional before searching for a house. You want to make sure your credit is in order because mistakes can take months to correct. You also want to know how much house you can afford. You can run calculations online, but a good mortgage professional will better help you determine which loan is the best fit for you.
Finding the best deal on a mortgage can be a challenge because fees and rates change daily, sometimes more than once a day.
Whether you’ll get the best deal from going directly to a bank, a mortgage lender or a mortgage broker often depends on your situation, the mortgage pro handling your case and what’s being offered at the time. That means talking to actual people on the phone or in person, not just filling out an online form.
You can buy a home with as little as 3 percent down – and nothing down if you’re a veteran. But if you put less than 20 percent down, you’ll need private mortgage insurance (or the Federal Housing Administration equivalent) in most cases, which can add roughly $100 to a monthly payment on a $100,000 home.
In general, banks have the fewest options available because they offer only their own products, but they may be more flexible if they’re lending their own money – and they may make a deal if you have substantial assets.
Mortgage brokers offer the largest number of options, since they can shop your loan among many lenders. While the rates and fees offered by lenders are usually comparable, lenders that see a slowdown in business may offer better pricing, and a good broker will grab those deals.
When you get quotes from companies, don’t look at just the interest rate. Look at the rate and all the fees, including points, origination fees and any other fees charged by the lender. A “no-fee” loan just means the fees are included in the rates.
Ask to see the Good Faith Estimate worksheet, not just the GFE. Many people consider the current Good Faith Estimate, required by law, to be confusing, and it is being replaced Oct 3rd with what consumer advocates hope will be a more useful document.