Learn how to get a mortgage
Getting a mortgage is easier than many buyers think. Once you’ve started with a lender, your loan officer will walk you step by step through the process.
But getting started can be the hardest part. How to find a lender and apply for a home loan? And how do you know which mortgage is the best?
To give you some tips, loan consultant Ivan Simental explained how to get a mortgage in a recent episode of The Mortgage Reports Podcast. Here is what you need to know.
Check your new rate (January 12, 2022)
Listen to Ivan on the Mortgage Reports Podcast!
Step 1: Define your budget
Before you even start shopping for a mortgage, you need to budget for a home. This means knowing what you can afford to pay up front (i.e. down payment and closing costs), as well as what you can afford on a monthly basis for your mortgage payment.
You can use our mortgage affordability calculator and down payment calculator to get an idea.
After you’ve figured out the numbers, Simental says to keep that budget in mind throughout the process of finding your loan.
“This will help keep you on track to achieve your goals,” he says.
Keep in mind that mortgage calculators can only give you an estimate. To know your exact budget, you’ll need to connect with a mortgage lender and get pre-approved. Finding a lender is therefore your next step.
Get matched with a mortgage lender (January 12, 2022)
Step 2: determine the type of lender you want to use
Next, you will need to consider the type of lender you want to work with. There are several types to choose from, including mortgage brokers, large banks, online lenders, and small local lenders and credit unions.
These all offer slightly different pros and cons:
- Big banks may be able to get your loan faster
- Local banks and credit unions can offer more help and practical advice
- Online lenders can often be more convenient due to their digital processes and applications
- Mortgage brokers can take a lot of stress off your shoulders, handling much of the buying and applying process for you
You can certainly consider more than one type of lender in your search, but getting an idea of the type you might want to work with can help guide your rate buying and make the process more efficient.
Simental also says to tread lightly if you are considering an online lender.
“Be very careful with online lenders who advertise super, super low rates,” Simental says. “Most of the time, they’ll have these hidden charges and very, very thin print that you have to read with a magnifying glass. Nine times out of 10, this incredible interest rate is not free.
To learn more about comparing the rates and terms of your mortgage offers, read How to buy a mortgage: tips for comparing quotes and rates.
Step 3: Get referrals from lenders
Now ask your social circle for lender recommendations. As Simental explains, “My first recommendation would be to ask family and friends, ‘Hey, who helped you buy your house? And how did this experience go? “
Then, if they are particularly happy with their lender’s service, ask for the name and contact information of their loan officer or banker. You can then preselect them and include them when shopping.
Be sure to only ask from people you really trust (and for whom you would risk money). “You want to ask your family, your friends, your coworkers and the people you trust and who are very dear to you,” says Simental.
You can also check out reviews and ratings online once you have a few referrals.
“Go on Google and check the reviews there, or go to Yelp,” Simental says. “That way you can see, okay, they’ve got 100 reviews. And out of those 100 reviews, they have 4.7 stars or 4.5 stars. It’s pretty good in my book.
Just keep in mind that the best lender for a friend or family member won’t necessarily be the best for you. Lenders tailor their rates and fees to each borrower, which is why it’s important to shop around for your better deal.
Step 4: Get a loan estimate
You will then need to request a quote from each of the lenders you are considering. This usually requires some basic information about your credit, income, and the price you plan to buy.
Once you’ve completed the lender’s application, the lender will provide you with a loan estimate – a detailed breakdown of all the costs and fees associated with the loan being offered to you.
“Be very, very careful when the lender gives you an estimate,” Simental says. “Take a look at your loan estimate and go line by line and ask them to explain to you what the items are and what the fees are and what is associated with the cost of the loan because sometimes they will have some hidden fees in there. . “
You’ll also want to compare your estimates line by line to make sure you pick the best deal possible.
Compare the offers of several lenders. Start here (January 12, 2022)
Step 5: Ask questions
Finally, ask lots of questions of the lenders you are considering. Make sure that you feel comfortable with them and that you have confidence in their abilities, knowledge and skills.
“This will probably be the biggest purchase you’re going to make, so ask questions,” Simental says. “Ask ask ask.”
Simental recommends asking questions about fees, closing times, the underwriting process, etc.
You should also inquire about pre-approval. Is this just a prequalification, or are they offering fully subscribed pre-approval Who can guarantee a hiccup-free closing (and give you a head start in negotiations)?
You should also discuss communication styles. You want a lender who communicates with you in the way that you would like to communicate. Are they responsive over the phone? What if you prefer to send texts and emails? Get an idea of the response times you can expect and their availability for questions.
Step 6: shop
It might seem intimidating to reach out to multiple lenders and get loan estimates and information from each of them, but it could save you a lot of money up front and in the long run.
It will also have an impact on the service you receive and your entire experience in one of the most important transactions of your life. So be prepared to put a little elbow grease on finding the right fit.
According to Jon Meyer, loan expert for The Mortgage Reports and MLO Chartered, finding the right loan officer is especially important in today’s competitive real estate market.
“When looking for a loan officer for a purchase, I really think it’s more important to find a knowledgeable and efficient agent who can close as quickly as possible versus one who can save you a fraction of a percentage point. Says Meyer.
He adds, “The speed of closing is going to be an important point that the seller side will look at in offers that are not entirely cash. ”
Therefore, when shopping, be sure to ask potential lenders about their closing time and how reliably they can meet those deadlines.
Step 7: Complete your request and close
At this point, you’ve set your budget, got pre-approved, compared rates, and chosen a lender. Provided that you also have a signed purchase agreement for the home you wish to purchase, the rest of the process should be fairly straightforward. With the advice of your loan officer, you:
- Complete your mortgage loan application
- Submit all required documents
- Have the house inspected
- Have the house appraised (your lender will order the appraisal)
- Wait until your mortgage lender has finished taking out the loan
- Receive final approval
- Sign your final papers
- Pay the money to close (down payment, closing costs and other upfront costs)
As a final tip, it’s wise not to make big financial changes when you’re in the mortgage process.
For example, don’t quit or change jobs, take a new loan, open new credit cards, or make large purchases before closing. These types of moves can change your financial profile and potentially jeopardize your mortgage approval.
Maintain the status quo and follow the advice of your loan officer to give you the best chance of getting a mortgage smoothly and on time.
Start Your Mortgage Process
Are you seriously considering buying a home? So now is the right time to get your funding in order.
To get started, contact at least three lenders. Apply for pre-approval with each one, then carefully compare the rates, terms, and fees offered to you. Then you can choose the lender with the best deal for you and go ahead with a full application.
Ready to start?
Check your new rate (January 12, 2022)