There is a lot that goes into buying a property. Regardless if you are buying as a primary residence or an investment you need to find the right type of financing. There are times when the best financing is through a traditional lender. Anyone that has closed a deal with a bank over the past five years knows that the process has changed. The basic steps and requirements are the same but the amount of paperwork and documentation has increased dramatically. This has tacked on additional days to the closing which impacts the interest rate and at times even the loan approval. Getting the best financing deal does not have to be an intimidating process. Here are five tips to help you get the best possible mortgage deal.
- Know Your Options. With any loan you should always have a good idea of exactly what you are getting into. Most buyers are so consumed with finding the right property that the mortgage is often the last thing they think about. As you start your property search you should take some time to research your mortgage options. Start with all of the loan program options available. A traditional 30 year fixed mortgage may not make the most sense given your goals for the property. There are times when a short term adjustable rate mortgage (ARM) can be a much better alternative. Even if you plan on using the property as a rental you should at least explore a hard money option. This type of loan may not make sense for the current purchase but you never know when you may need it at some point down the road. The better you know and understand all of your loan options the easier it is to get things started when a good deal comes your way.
- Be Ready To Act. If you are thinking about making an offer you need to be ready to act. You never want to have to scramble around with your financing if a good deal comes your way. The best way to avoid this is by having all of your loan items in place well before you start your property search. Items like your tax returns, business license, social security card and driver’s license do not need to be updated regularly. Keep these items in a dedicated file on your laptop or in a secure place in your home. Other items such as your bank statements, rent checks and income documents can be updated on a monthly basis. You should also keep an updated pre-qualification letter on file as well as a copy of your credit report. The more items you can supply your lender or mortgage broker the easier it is to get the process started. Cutting a few days off of the process can speed up the projected closing date which can give you the inside track on the deal.
- Shop Around. In a perfect world you would have an established relationship with a lender you can turn to when financing is needed. If you haven’t had a need for lender financing in some time this may not be the case. It is important that you shop around everyone involved in the transaction. Obviously the lending company you use is most important but you can also shop the attorney and homeowners insurance company. Like anything else in business you are shopping for a mix of price, experience and efficiency. If you know that your loan approval may be difficult simply getting it closed is the top priority. You may have to pay and extra point to use a mortgage broker who has access to a certain program with a lender. Don’t nickel and dime everyone in the process but don’t give anything away either. Whatever you do you should give yourself peace of mind knowing that you spoke with at least three people and were able to compare apples to apples.
- Lock. All buyers want to get the best possible deal. However you always need to remember that there is another side to that coin. Interest rates are a moving target. They can move every day and at times even multiple times a day. As much as you want to lock at just the right time trying to squeeze an extra eighth of a point may end up costing you if rates go up. Always lock when you are comfortable with the deal you have. Interest rates have a way of going up much quicker than they will go down. On larger loans a quarter point can have a tremendous impact on your monthly payment. Once you lock you cannot get a lower rate but you also eliminate the risk of getting a higher one. Always lock when you are comfortable regardless of where you think the market may be headed.
- Ask Questions. This is your transaction and you should be in control of every aspect of it. If you have a question about something or someone in the process you need to ask. Sometimes by simply asking a question you can get a better deal. It is not a stretch to say that you can shave off as much as $1,000 in the transaction by using the right attorney or questioning a fee from your broker. If something doesn’t look or feel right speak up and ask about it.
Any fees with the loan must be disclosed at the time of the application. You can be confident that the deal you sign will be the deal you see at the closing. Use these five tips to help you get the best possible mortgage deal