Want to find the best home loan? Here's what to do. Pick two weeks to look at different banks. This won't hurt your credit score.
First, look at your credit report. Then get your work papers ready – like how much money you make and your tax forms.
Check home loan rates every day. You can find these on big websites like Freddie Mac. Look at many types of banks. Try online banks, regular banks, and credit unions.
Don't just look at the interest rate. Look at all the costs to get the loan. Ask at least three banks what they can offer you. When one bank gives you a good deal, show it to other banks. They might give you an even better deal!
If you get ready and pick the right time to look, you can save lots of money on your home loan.
Know Your Credit Score First
Getting ready to buy a house? Let's talk about your credit score first! It's like a grade that shows how well you pay your bills.
You can get a free look at your credit history once a year. Just go to AnnualCreditReport.com. But you might need to pay a small fee to see your real credit score number.
Try to get your score up to 740. This helps you get better loan deals. Don't worry if your score is lower – you can still get a home loan with a 620 score, or even 580 for some types.
If your score is too low, you can make it better in a few months:
- Pay your bills on time
- Use less of your credit cards
- Fix any wrong info in your credit report
When you get a better score, you can save lots of money on your home loan!
Set Clear Financial Goals
Money goals help you make smart choices when looking for a house loan. Think about what you want before you talk to banks. This way, you won't get pulled in by deals that don't fit your needs.
First, know how much you can pay each month. Count your house tax, home insurance, and other fees too.
Next, figure out how much money you can put down now. Make sure you still have some savings left for tough times.
Then, pick how long you want to pay your loan. You can choose 15, 20, or 30 years. Think about when you want to stop working.
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Last, set the most you'll pay for a house. Your monthly bills shouldn't be more than 43% of what you make.
Research Current Market Rates
Watching mortgage rates is like watching the weather – they change every day. To find good rates, look at trusted websites like Freddie Mac and Bankrate. Be careful of flashy rates you see in ads. They might not be what you can get.
| Rate Type | What to Look At | When to Lock It In |
|---|---|---|
| 30-year Fixed | Main rate & APR | When rates drop low |
| 15-year Fixed | All costs to close | When money news is shaky |
| ARM Loans | Highest and lowest allowed rates | When fixed rates go up |
Take your time to watch rates for two weeks or more. This helps you see what's normal and what's not. Sign up to get alerts when rates change. Ask banks to email you when good rates come up. Read simple money news to stay in the know.
Gather Required Documentation Early
You need papers to get a house loan. Get your pay papers, tax papers, and work papers ready first. It helps show banks you can pay them back.
Look at your credit score too. Think of it like a report card that shows how well you pay your bills. You can check your credit score with three big companies. If you find any wrong info, you can fix it.
This way, you'll be ready when you ask for your house loan.
Pay Stubs and W-2s
Getting a home loan means showing how much money you make. You need to prove you can pay back the loan.
You must share:
- Your last month of pay stubs
- Your W-2 tax forms from the past two years
- A note about any time you weren't working for more than a month
- Papers that show extra money you make from overtime or bonuses
People who work for themselves need more papers.
Keep copies of all these items on your computer. The bank may ask to see them again. When you have all your papers ready, getting your loan will be faster.
Remember: Being neat with your money papers shows banks you're good with money.
Tax Returns Ready First
You need your tax papers ready before you ask for a home loan. The people who give home loans want to see how much money you made in the last two years. This helps them know if you can pay back the loan.
If you work for yourself, you need your tax forms called 1040s and Schedule C. If you make money from rent, you need Schedule E forms too. Get all your tax papers in one place. Keep them in a folder on your computer.
You can also get special papers called tax transcripts. You get these from the IRS by filling out a form.
When you have all these ready, it makes getting a home loan much faster. It also shows you're ready and serious about buying a home.
Credit Reports In Hand
Getting your credit reports is a key step before looking for a home loan. You need to get them from three big credit companies. Looking at them early helps you fix any wrong info and know what banks will see.
Look at these things in your reports:
- Check if your bill payments show up right
- See how much of your credit cards you use
- Look for old money problems like not paying taxes
- Find out who else has checked your credit lately
Get your reports at least three months before you want to get a home loan. This gives you time to fix any errors and make your credit better.
You can make your credit score higher by:
- Paying bills on time
- Using less of your credit cards
- Not opening new credit cards
- Fixing wrong info in your reports
Use Online Comparison Tools
I love finding good mortgage deals online. It's like shopping for anything else – you want to find the best price! Websites like Bankrate, NerdWallet, and LendingTree make it easy. They show you loans from banks near you.
To get started, you tell them a few things about you. How good your credit is. How much money you can put down. How big a loan you need. Then, these tools show you loans that work for you.
You can pick what kind of loan you want. You can see how long you'll pay for it. You can even see if the rates stay the same or change. Always look at the APR – that's the real cost with all the fees added in.
These sites have tools that show you how much you'll pay each month. This helps you find a loan you can afford. It's like having a helper who makes sure you get the best deal.
Apply Within Two Weeks
Want to keep your credit score safe?
Get all your home loan paperwork done in two weeks. When you do this, credit companies will see all your loan checks as just one check.
This means you can ask many banks about loans during these two weeks. Your credit score won't go down.
You can find the best loan deal this way.
Credit Score Protection Benefits
When you look for a home loan, you can keep your credit score safe. Just send all your loan forms to banks within 14 days. This helps because credit groups see all these checks as one big check, not many small ones.
This helps protect your credit score in four ways:
- All the bank checks only count as one check
- Your score only goes down by about 5 points one time
- You can still get good loan rates
- After one year, the check won't affect your score at all
You can feel good about talking to many banks to find the best loan.
Look at all the different offers and pick the best one. Your credit score will stay strong while you do this.
Multiple Pre-Approvals, One Pull
When you want to get a home loan, you can ask many banks to say yes first. The best part is that you can do this without hurting your credit score.
Banks know that you want to find the best deal. So if you ask many banks in two weeks, they only look at your credit once. It's like they put all the checks into one big check.
To make this work, you need to ask all the banks within two weeks. This way, you can find the best deal for your new home.
Before you start, get all your papers ready. You'll need:
- Papers that show how much money you make
- Tax papers
- Bank papers
When you have all these ready, you can quickly show them to each bank. This helps you get the best deal on your home loan.
Focus on Relevant Lenders
Getting a mortgage is easier when you pick the right kind of lender. You can choose from:
- Banks near you
- Credit unions
- Online lenders
Pick the one that works best for you by looking at:
Your credit score
- Banks want higher scores
- Online lenders are more open to lower scores
Down payment money
– Credit unions let members pay less upfront
How you like to talk to people
- Banks let you meet face to face
- Online lenders help through your computer
Interest rates
– Online lenders often have better rates
Look at what each type offers.
Then only apply to the ones that fit what you need. This will save you time and make getting a loan much easier.
Contact Multiple Mortgage Brokers
Getting a home loan is easier when you talk to many brokers. A broker is like a helper who finds loans for you. They know lots of places that can give you money to buy a home. They can often get you better deals than if you look by yourself.
Talk to at least three brokers. Give each one the same facts about what you need. Ask them:
- How much they charge
- How long it will take
- What rate you can lock in
Different brokers work in different ways:
- Some work on their own and know 20-30 lenders
- Some work for banks and know 5-10 lenders
- Some work online and know more than 50 lenders
Tell each broker what others offer you. They may try to give you a better deal to win your help.
Make sure to check if your broker is real by looking them up in your state's records.
Look Beyond Interest Rates
When you want to buy a home, don't just look at the interest rate. A home loan costs more than that. You need to know all the costs of owning a home and what the loan rules mean for your money.
Look at these costs too:
- Money you pay when you close on the house – this can be very different with each bank
- Extra insurance costs if you pay less than 20% up front
- Fees if you try to pay off your loan early
- How long the bank will keep your rate the same, and what it costs
Ask each bank for a paper that shows all these costs. Put them next to each other to see which loan is best for you and your money plans.
Understand Different Loan Types
Getting a home loan is a big choice that affects your money for many years. You can pick from simple loans that need good credit, or FHA loans that let you pay less up front.
If you served in the military, VA loans let you buy a home with no money down. USDA loans help people buy homes in small towns.
You can get a loan where your monthly cost stays the same. Or you can pick one that starts low but might go up or down later.
Big homes need special big loans. If you want to build a new house, you can get a loan just for that.
Each loan has its own rules about credit scores and how much money you need to start.
Think about what you can pay now and later. Pick a loan that works best for your needs and plans.
Negotiate Better Terms
When you want a better home loan deal, talk to at least three banks.
Show each bank what the others can give you. This helps you get a better price.
If you pay your bills on time and have a good job, ask for lower rates. Banks may say yes.
You can also ask them to cut some of the costs. They might drop fees for your loan papers or other charges if you have good credit.
Compare Multiple Offers
Getting the best home loan means looking at different offers. Ask at least three or four banks what they can do for you. This gives you power to get a better deal.
Look at each offer side by side. Break them down into simple parts:
- The total cost (APR) of your loan
- How much you pay each month
- Extra costs to start the loan
- How long the bank will hold your rate
Get all your offers in two weeks. This way, checking different loans won't hurt your credit score too much.
Banks want your business. If you show them a better offer from another bank, they might match it or give you an even better deal.
Remember: Always get everything in writing. This makes it easier to compare and helps you get the best deal for your new home.
Request Lower Interest Rates
You have the power to get better rates on your home loan. Think of it like shopping for the best price on a car. Get offers from different lenders and see who gives you the best deal.
Tell lenders about your good points. A high credit score shows you pay your bills on time. A steady job shows you can make your payments. Less debt means you have more money to pay your loan.
If you already bank with a lender, remind them. You can say you'll move your other money to their bank. This might help you get a better deal.
If they won't lower the rate, ask them to cut other costs. You can walk away if you don't like what they offer. Many banks want your business, so use that to your benefit.
Ask About Fee Waivers
When you want a home loan, many fees can be lowered or removed. Smart people who want home loans know this. Just ask! Lenders want your business and will often work with you.
You can ask about these fees:
- Money to apply
- Money to do paperwork
- Money to lock in your rate
- Money to start the loan
When you talk to lenders, look at all the papers they give you. Check what each one wants you to pay. Some may take away one fee but make you pay more in other ways.
Look for the big fees that cost the most money.
Think of it like a talk with a friend. Tell them what you want. Ask what they can do to help. Many people save money just by asking about fees!
Review All Closing Costs
When you buy a home, you need to pay special costs called closing costs. These are extra money you pay on top of your down payment and monthly house payments. Think of it like paying fees to finish buying your home.
You will get two important papers. One is called a Loan Estimate. The other is called a Closing Disclosure. Read both papers very well. Look at each cost one by one.
Some costs you might see:
- Money the bank charges you
- Home check-up fees
- House insurance costs
- Credit check costs
- Tax money you need to pay ahead
Talk to your lender if you see any costs you don't understand. Some costs you can ask to be lower. Other costs stay the same no matter what.
Get papers from different banks. Put them next to each other. Look at all the costs. Some banks might charge more than others. This helps you pick the best deal for your money.
