A great mortgage will give you the funds you need to buy a house at the most affordable price possible. If you're buying a home, use this four-step process to find a great mortgage.
1. Check Your Credit Report
Before you apply for a mortgage, check your credit report with each of the three major reporting agencies to make sure there are no errors. You can check your report with each agency for free once per year, or you can get your credit report for a nominal fee if you've already used your annual freebie.
Any errors on your credit report should be corrected before you apply for a mortgage.
2. Determine What Type of Mortgage You Want
Also, determine what type of mortgage you actually want before you submit application papers. The factors to consider include the following:
- Amount to be borrowed
- Duration of the loan
- Type of interest rate (i.e. fixed or adjustable)
- Monthly payment
A mortgage calculator can help you determine what monthly payment you can afford. In general, fixed interest rates come with more security because they won't increase at any point during the loan's term.
3. Apply to Three Lenders in Your State
When you're ready to apply, apply to three different lenders in your state. Choose two lenders who offer the lowest rates in your state, and make the third your favorite local bank. Between these three lenders, you'll have a good combination of price and service options to choose from after you're approved.
As you apply, make sure you're applying for the type of loan that you chose in Step 2 and submit all the applications within a few days of each other. As long as the applications are submitted in close succession, they'll all count as only one inquiry on your credit history -- lenders understand that you want to shop around and won't penalize you for doing so.
4. Choose the Loan with the Most Affordable Option
Unless one lender wows you with especially helpful service, choose the loan that has the lowest fees.
All of the mortgages will likely have the same interest rate since this is based on your credit score and the federally set rate -- neither of which change when different lenders do the calculations. Also, costs like appraisals and title insurance expenses will be the same regardless of what loan you take because these services are provided by different companies.
Where loan costs will differ is in the points and origination fees. Add each loan's point costs and origination fees together, and select the one that's the most affordable.
To learn more, contact a mortgage lender.
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