Did you know that since COVID-19 mortgage rates have decreased? Therefore, many people are taking advantage of this opportunity and buying homes at exceptional rates! In fact, some speculate that we might run out of new homes because of the high demand and low inventory.
This means mortgage brokers are looking for new customers to enter a long-term agreement before homes run out. However, not all home loans are the same! In fact, bank loans from big corporate companies can be very daunting for new homeowners.
Thankfully, you have other options. So if you've been searching for the best mortgage broker near me, then you've come to the right place!
What Is a Mortgage Loan?
Home mortgage loans are for buyers who want to purchase real estate with the intent of repaying the lender. The payments are usually distributed over a certain time with interest rates.
And if the buyer fails to meet the necessary payment, their home becomes collateral. There are also 2 kinds of mortgage types: fixed-rate and adjusted-rate mortgages. These types of mortgages differ in the way the interest is applied.
For example, fixed rates the interest rate does not change from the day you take out the loan. However, with an adjustable-rate mortgage, the interest rate is subject to change.
What Is a Mortgage Lender?
A mortgage lender can be many entities. For example, banks, financial institutions, credit unions, government facilities are all great lenders.
A mortgage loan is usually a secured type of loan. This means the interest rates are lower than other types of loans. However, this also means that if you don't make your payments, your home is used as collateral.
How Do You Apply for a Mortgage?
Applying for a mortgage can be done in many ways. However, one of the most popular ways to apply for a mortgage is through a mortgage broker. If you're not familiar, a mortgage broker is fully licensed and works to connect buyers with lenders.
They can also give you advice on mortgage deals and refinancing questions. A mortgage broker will also do their research to connect you with the best lenders and interest rates.
This is done by reviewing which plan is best for you based on your credit score, down payment, and income. And once a mortgage lender has found the best mortgage loan for you, they'll connect you with the bank!
The Truth behind Interest Rates
Oftentimes future home buyers are scared to apply for a mortgage because of the interest rates. But the great thing about a free market is that you can look around for the best interest rates.
It's important to mention that larger banks will charge higher interest rates. This is why many future homeowners choose smaller and local lenders!
Don't let the fear of interest rates stop you from buying a home. Overall, these rates can change depending on how well your down payment is and your credit score. Therefore, you have options and room for negotiation.
Tips for Finding the Best Mortgage Lenders
If you're not interested in hiring a mortgage broker, here are some factors to consider when doing your own research. For starters, not every lender will offer you any kind of loan.
So if you're looking for a substantial amount of money, you'll need to find a lender that offers jumbo loans. Secondly, pay attention to the interest rates. You want to look for low, competitive interest rates. This way your monthly payments are also lower.
There are also qualifying requirements that you'll need to pass before you can get approved. Some of these requirements include income, credit score, and other factors.
Oftentimes, buyers aren't aware of the fees that apply for a credit check. So be aware of any fees or added costs.
Who Is the Best Mortgage Lender?
The best mortgage loan can come from anywhere. However, many homeowners experience better customer service and interest rates when they choose local banks rather than big corporate banks. This is because big-time lenders have a hard time relating to everyday customers.
Therefore, the needs of the customers are not met as efficiently. Thankfully, with local banks, the lender can sit with you directly and discuss your options. You also have support from expert staffers whenever you need them.
Not to mention, your home payments can be reasonably scheduled to fit your needs. So when you're looking for the best lenders, consider choosing a local bank!
How to Qualify for a Mortgage Loan
Your credit score will play a huge factor in how much a lender is willing to give to you. Typically, most lenders want a minimum of 620 for a credit score. But, some loans require no credit scores such as an FHA loan.
However, these are government-backed loans that work differently. If your credit score falls under the 620 mark, here are some tips on how to raise it:
- Open up a credit card and make payments over the next few months
- Make higher payments on your loans
- Never miss a payment
- Pay your credit card twice a month
These are simple ways to build your credit score. However, be aware that making a substantial difference will take time.
If you have little to no credit, this process may even take years. That's why it's important to begin acquiring credit at 18 years old.
Tips on Handling a Mortgage
Bank loans can be very daunting especially for first-time homeowners. However, by knowing the right information, you'll never fall behind on any payments.
Creating and Following a Budget
Before you even begin to buy a home, think about your budget. Oftentimes, homeowners have a hard time handling a mortgage because they had an unrealistic budget.
A good way to avoid missed home payments is by creating a budget for what you can and can't spend. For example, figure out what you can spend on your utilities, home insurance, property taxes, and maintenance.
Once you've set a clear goal for these expenses, add them all together. Then weigh in the monthly payment for your mortgage.
By doing this, you can have an understanding of how much you can afford on home payments. You should refer to this number when looking for homes.
Pay off Any Debts Beforehand
The debt-to-income ratio is another factor that is weigh-in when applying for a mortgage loan. If you're not familiar, this term refers to the amount of debt you owe versus how much you make.
If this ratio shows that you make less than what you owe, a mortgage line might be declined. This is why it's important to pay off any credit cards before applying for bank loans.
Look for a Mortgage Pre-approval
A pre-approval will put you ahead of the curve. In fact, you're more likely to find a home in your price range once you've been pre-approved. A pre-approval simply means a lender has approved you for a specific loan amount.
A pre-approval is determined the same way a regular mortgage loan application is done. You might be wondering what's the difference between a pre-approval and regular approval.
For starters, a pre-approval happens before submitting an offer. Nevertheless, you'll still need final approval once you're ready to buy a home.
And obtaining a pre-approval will not secure your loan terms. In fact, your lenders will request additional information about the property before the final approval is finalized.
Typically, these are the final approval questions:
- A title search will be conducted to ensure there are no tax liens or current ownership claims
- An appraisal value needs to be confirmed before lenders approve the final loan to ensure the investment is worthy
- For most FHA loans the property will need to be checked to make sure the condition is good
All of these factors will determine if you are pre-approved or not. Overall, the purpose of a pre-approval is to make sure the future home buyer is in good financial health!
Refinancing: What Is It?
During your mortgage term, there may come a time when you'll have to refinance your mortgage. Refinancing means you're obtaining a new mortgage loan to pay off the first loan.
What Is the Point of Refinancing a Mortgage?
Refinancing your loan can lower the monthly payments. However, there are other reasons why people chose to refinance their mortgages. For example, some homeowners refinance because they want to lessen the period of time on their loan.
Here are some other common reasons why homeowners choose to refinance their mortgages:
- Reduce the total interest on the loan
- Change the loan rate from adjustable-rate to fixed-rate and vise versa
- Take cash and pay for other expenses
- Reverse mortgage premiums
These are all great reasons to refinance a loan. Some mortgage plans only let you refinance after a certain amount of time. So it's best to ask your lender when a refinancing option will be available to you.
However, the best bank loans will provide you with an easy process for refinancing loans.
Tips for Finding the Best Mortgage Broker Near Me
Buying a home is a very big decision which is why finding the best broker is important. Here are some easy tips to follow when researching mortgage brokers in your area!
Do Thorough Research
The type of property you're buying will play a huge factor. For example, are you wanting a vacation home, starter home, secondary home, or permanent home? All these factors will reflect on your mortgage loan. Therefore, you should do your thorough research on who can offer you the best deals based on your exact needs!
Look at Reviews or Ask a Friend One of the best ways to find the best mortgage broker is by asking a friend for advice. If a loved one had a similar mortgage type, you can greatly benefit from their take on the process.
You can even avoid some common mistakes by listening to personal experiences. The personal reviews and testimonials can also be very telling of how a business is run. So don't hesitate to look at reviews that are on the website!
Always Trust Your Gut
Working with a mortgage broker can become a very personal experience. That's why it's crucial to trust your lenders and feel comfortable around them. So if at any point you feel uncomfortable or feel as if your needs aren't being fully met, look elsewhere!
Terms You Should Know
Mortgage loans can get confusing with all the different terms and conditions. So down below are some basic terminology you should memorize when speaking to mortgage brokers.
Escrow
Your mortgage payment includes more than just the principal and interest payments. Your property taxes, mortgage insurance, and homeowners insurance are also included in your payment. These charges all go into an escrow account your loan officer sets up for you.
Loan Servicer
The lender you get your mortgage through will usually sell your loan to a loan servicer. The loan servicer will send you a notice that your loan has been sold to them and provide information on how to send your monthly payments to them.
Down Payment
When you get a mortgage, the lender will usually not finance 100% of the purchase price. You will be responsible for the down payment, which is a portion of the sales price that is due upfront. How much you will need as a down payment will depend on the type of mortgage loan you get.
The down payment must come from your own funds or be a gift from a family member or friend. You cannot get a loan for the down payment. Lenders will look at your last 2-3 months of bank statements to ensure the funds are your own.
Interest Rate
The interest rate is the amount you will pay annually for borrowing the money from the lender. The amount of risk you present determines your rate. Your credit score is the biggest factor. The higher your score, the lower your interest rate will be.
Rates also vary by lender, which is why it’s important you compare loan offers and rates with at least 3-4 mortgage lenders before deciding to ensure your getting a competitive rate.
Annual Percentage Rate (APR) The annual percentage rate is the loan’s total cost, including the mortgage rate, closing costs, and any other lender fees. The APR is a quick and easy way to compare different loan offers to find the loan’s real cost and determine which loan will save you the most money.
Amortization
The amortization schedule shows how much of your monthly payment goes towards principal versus the amount that goes towards interest. In the beginning years of a mortgage, the majority of your payment goes towards interest. In the later years, the majority of your payment goes towards the principal balance.
What Are the Different Types of Mortgage Loans?
It's important to know all of your options before agreeing to a loan term. Down below is a list of different loans and their qualifications.
Home Possible Loans
These kinds of loans require a 620 credit score and a 3% down payment. They were originally created to compete against FHA loans because of the low down payments.
However, FHA loans are slightly more popular than these kinds of loans.
USDA Loans
A USDA loan requires no down payment! Not to mention, they also have the lowest mortgage insurance rates.
However, this kind of loan is exclusively offered to low to medium income levels. Lastly, these loans are only offered in rural parts of the U.S.
FHA Loans
These loans are backed by the Federal Housing Administration which makes them the most popular loan. This loan type requires a 3.5% down payment and a credit score of at least 580.
Conventional 97 Loans
Conventional 97 loans are different than traditional conventional loans. This is because they require a 3% down payment. Not to mention, they will require your credit score to be at least 680!
Conventional Loans Conventional mortgages require you to have a 620 credit score and put down around 5-20 percent of the loan. Lastly, these loans are not backed by the government.
VA Loans
A VA loan is offered only to military veterans. This loan does not require insurance of any kind or a down payment! If you're a military veteran ask your mortgage broker about a VA loan.
What’s Included in Your Monthly Mortgage Payment
When you get a mortgage loan, there are more things to pay besides just the principal balance and interest. There are taxes, insurance, and HOA fees to pay. Here is a breakdown of all the costs associated with a home loan.
Principle and Interest
The term "principal balance" refers to the total amount of money you borrowed. And every month, a portion of your monthly payment, will go towards this balance.
However, for the first few years, only a small portion of your payments will count towards the principal. But as time passes, the principal percentage per month will change. In other words, more of your monthly payments will go towards your principal!
Property Taxes
In the U.S. every homeowner has to pay property taxes per year. Your property taxes are based on your home and the county you live in.
Typically, part of your mortgage payments will go towards an escrow account. This means your lender will take care of the tax payments once they are due.
Mortgage Insurance
When you take out a mortgage, you'll be responsible for getting a PMI. A PMI is a private insurance that protects the lender if you miss a payment. Typically, you'll need a PMI if you have a conventional loan and your down payment was at least 20%.
Closing Costs
When you finalize your mortgage plan, most lenders will charge you a processing fee. This one-time fee covers a credit report, application fee, and origination fee!
All closing costs will differ depending on the lender. The best banks loans will have competitive closing costs. So, you should ask your mortgage broker about their fees before finalizing your mortgage!
Help and Support
When looking for the best bank loans and lenders, make sure you're also looking for help and support. With larger banks, the loan officers are busy handling multiple mortgage lines. Sometimes this makes it hard to get the support you need.
So if you're a first-time homeowner with many questions, consider a smaller and local bank! And always look into the bank's financial reputation before making a final decision.
Get a Home Loan Today
Your future awaits! So no more searching for "the best mortgage broker near me". Because now that you know about mortgages and lenders, there's nothing that can stop you! Remember to carefully review every detail of your mortgage arrangement before signing any paperwork.
And most importantly, make sure you feel comfortable and supported by your loan officer. So if you're ready to buy your dream home, contact us today and speak to one of our loan officers