Here are 10 tips for getting the best mortgage deal:
Compare apples to apples. 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 August 1 with what consumer advocates hope will be a more useful document. Until then, ask for the complete worksheet, and make sure it itemizes all the fees.
Interview the actual person who will handle your loan. That could be a mortgage broker, a bank employee or a loan officer. Ask about experience and qualifications. Is the person licensed (required for brokers but not bank employees)? Does he or she belong to the National Association of Mortgage Professionals or your state’s mortgage professional association? Ask for references and look at reviews online. “The company does not matter as much as the originator,” Fleming says. “Even good companies hire really bad people.”
Plan for costs that are not charged by the lender. Additional costs include title insurance, real estate transfer taxes and required escrows for property taxes and homeowner insurance. In some states, shopping for closing agents can save several thousand dollars, while escrow or closing costs are minimal in other states.
Make sure the lender offers the program that is best for you. Not all lenders offer FHA, VA or USDA Rural Development loans. Down payment requirements, loan-to-value ratios and credit requirements also vary by lender.
Get your free credit report before you start. This will not allow you to put your feet up on the desk and demand the best terms, as one commercial suggests, but it will let you know where you stand. “Just because you have a 700 credit score doesn’t put the ball in your court,” says Donald Frommeyer, chief executive officer of the National Association of Mortgage Professionals and a loan originator at American Midwest Bank in Indianapolis.
Give the loan officer all details about your situation when asking for quotes. People who are self-employed, have suffered a foreclosure or recently changed careers especially need a good loan officer. “One of the toughest things for me is to tell a customer, ‘Hey, I really can’t help you,’ but I always have a potential solution,” Frommeyer says. “I don’t like to pull credit on somebody until I talk to them about what I can do.”
Do you want to pay more upfront or get a lower interest rate? If you’re planning to keep the loan for 30 years, it may make sense for you to pay more upfront to get a lower rate. If you plan to sell or are going to refinance in a few years, it may not.
Ask about what documents will be required. All mortgages require significantly more documentation these days. Find out what’s required, and be prepared to provide it.
Know who you’re dealing with when you fill out an online form asking for rates. Will you get phone calls from mortgage brokers trying to gain your business? Will you get quotes online or via email? Most online forms require you to provide significant personal information before giving you quotes (and no one can provide an accurate quote without knowing your credit store). Will the service pull your credit once you fill in the form or wait until after you have talked to someone? Both MortgageHippo's and SoFi’s automated systems rejected our freelance writer with good credit with no explanation, while a human broker would likely have suggested making a larger down payment or choosing a less expensive home.