The mortgage process can be threatening, especially for first-time home users, but it doesn’t have to be. As long as you know some basics about mortgages before you start the process, choose a good mortgage lender Seattle to guide you through the process from offer to completion, so getting a mortgage can be relatively painless.
With this in mind, before you start looking for a lender you need to know here, including how to compare different lenders and their mortgage offers.
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1. Know Your Credit Score And Do Damage Control If Necessary
To be clear, you do not need to know your credit score before you start shopping with a mortgage lender. However, if you check your score beforehand, mortgage lenders can give you an idea of what kind of terms they can offer (and then many more) – and whether you are even ready for a mortgage first.
Some credit plans require certain minimum credit scores. To name an example, a regular mortgage requires a minimum FICO credit score of 620, while a low-fee FHA mortgage can be obtained with a score below 580. So if you check your FICO score and find that you have 600, you know how to focus your search on lenders who specialize in FHA loans.
At the other end of the spectrum, some lenders offer unique terms such as 100% finance to borrowers with excellent credit scores. So if you know your FICO score (how to interpret it), you know which loan schemes you can qualify for realistically.
2. Understand The Difference Between An Interest Rate And An APR
One important difference you need to know before comparing lenders is the difference between interest rates and APR.
The interest rate is the price you pay for the loan, expressed as a percentage of the principal amount you borrow. For a basic example, if you borrow $ 1,000 a year, a 4% interest rate means you pay the lender $ 40 in interest.
On the other hand, the annual percentage rate, or APR, is the total cost of borrowing money. In addition to interest or finance fees, the APR also includes certain fees that you must pay to borrow money, such as the mortgage appearance fee charged by the borrower.
The point is, APR and interest rates are often slightly different, and the number you should consider when comparing lenders’ offers is APR. You may be wondering how different the APR is between two loans with the same interest rate.
3. Look Beyond The APR
In addition to interest rates, there are still some to ask prospective lenders.
For starters, ask how they communicate with customers (phone, email, etc.) and how quickly they can respond to messages. I have been through the mortgage process myself three times and I can tell you in person that it is annoying to have to wait several days when asking your lender for a status update.
You can also ask for breakthrough times, fees you expect to pay and how much to pay. There are minimum regular payments for some loan schemes (such as 3% for a regular mortgage), but some lenders require more.
4. Shopping Around
The smartest thing you can do so far is to shop for a local mortgage company. Talk to lenders at national banks, regional banks, credit unions and more. Ask your real estate expert for recommendations. See online reviews as they can tell you about each lender’s credibility, customer service and other qualities.
“Shopping around” doesn’t just mean talking to a few lenders. Each means taking the time to complete the pre-approval process with at least a few lenders to compare the terms of the loan you offer.
Mortgage pre-approval is a complete mortgage application that does not take into account a particular home. The lender will check your loan, verify your income and employment, and give you a firm commitment to lend a certain amount under certain terms.