Owning a house is a dream for many people, but very few of us have the savings available to pay cash for that purchase. Your home is often the largest purchase you’ll make in your entire life, so how you finance that purchase can make a huge impact on your future. The current median listing for homes across the United States comes in at $250,000, which means that it’s just as important to find the right mortgage as it is to find the right home. Your mortgage is a loan that will take years, and possibly decades to pay off, so getting the right rate can mean a savings of thousands of dollars over time.
There are two ways to go about financing a house, a mortgage broker or a mortgage lender.
A mortgage broker acts as a middle man between you and the lender. The mortgage lender is the actual institution that will be giving you your mortgage loan. Working directly with a lender creates transparent communication between you and the lender, which definitely works in your favor. There will be no delay in communication, and when you’re competing for that dream house with multiple other bidders, minutes can count.
Mortgage brokers don’t work for free, so be prepared to pay a fee for their services. They typically receive 1 or 2 percent of the cost of the loan in fees, which when dealing with numbers upwards of 300,000 can really add up.
Remember that using a broker does not mean that you are closed off from going directly to a lender for a loan. You can shop around with both options, and go with whoever offers you the best rate. Working with a broker is a convenience for borrowers who don’t want to shop around, but there is no guarantee that using a broker will get the borrower the best deal.
Whether you choose to go with a lender, a broker, or both, there are a few things you can do to put yourself in the best possible position before you being the mortgage shopping process.
Learn what’s out there.
There are so many mortgage lenders out there, it’s enough to make your head spin, so do a bit of recon on your own before going in for a loan. How is the lender’s customer service track record, for example? Remember, you may be dealing with this company for the next 30 years, so things like customer service can become extremely important.
Will they work with you on the terms of the loan? Clear communication and “human touch” is important when dealing with a lender.
Try to go with a company that has a strong record of excellent customer service. Ratings are important. Companies like Quikfund stand out for their customer service ratings, and that can come in handy when you have questions not only before, but also during and after the mortgage process.
Get on top of your credit score.
Everyone knows that having a good credit score is important, but how can you improve it? There are a few things you can do to help.
- Set up payment reminders to help you from missing payments. Does your bank give you access to automatic payments for creditors? Take advantage. 35% of your FICO score is your payment history. This category has the greatest effect on improving your scores, but past problems like missed or late payments are not easily fixed.
2. Don’t close, or open any cards! Length of credit history is important. Closing older cards shortens that history. New accounts will lower your average account age, which will have a larger effect on your scores if you don’t have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.
3.Pay down those balances. Your amount owed makes up 30% of a FICO® Score’s calculation of your credit. Tackling this category can be one of the easiest ways to boost your credit score.
4. Make sure you read the fine print.
Mortgages are complicated. Don’t be afraid to ask questions about requirements and fees, including costs beyond principal and interest payments. Not knowing these things in advance can cause headaches later, so if you don’t understand something, speak up. You won’t be the first to ask whatever questions you have, and you likely won’t be the last!