It’s a good time to be a homebuyer. Mortgage rates are still around historic lows, and in what was usually supposed to be a slow winter season, homebuyer traffic has stayed up. Housing affordability is also at a high.*
Working with a great lender and knowing what you want in a mortgage is a winning combination. But even after you’ve found the right lender, the second part can still be tricky. How do you know what to look for in a mortgage when there are so many options to choose from?
Do these 6 things before you decide on a mortgage
Sticking with our best-practice dos and don’ts, based on our 33 years of experience as a leading lender, can simplify the process of picking a mortgage:
1. Do keep an eye on your credit.
- You’re entitled to a free credit report each year by federal law from one of the top three credit reporting agencies in the U.S. Having a better grasp on your credit score puts you in the driver’s seat.
- Your credit score can affect your mortgage rate. This can impact your monthly mortgage payment, for better or for worse.
- Checking in on your credit annually can give you time to improve your score. Or fix any errors. AnnualCreditReport.com is authorized by federal law to provide a free yearly credit report to the public.
2. Do choose a lender based on reputation.
- Real estate is all about location, location, location. And mortgage lenders are all about reputation, reputation, reputation.
- Looking into a lender’s rep is one key way to protect yourself from predatory lending. Reading customer reviews (and asking for references) is a smart place to start.
- Our company, for example, is award-winning and community-driven. Our loan officers, like Marcie, are known for their warmth, connection, and how much they truly care.
3. Do continue to pay your mortgage or rent on time.
- Life happens. But even one 30-day-late payment on a credit card or another loan could set you back in your mortgage qualification.
- Paying your rent more than 30-days late within the past year might affect your loan terms, resulting in a higher down payment or interest rate.
- A mortgage application will typically be denied if a borrower has three or more 30-day-late payments in the last 12 months.
4. Do get prequalified first.
- Prequalifying for a home loan before you start searching for houses can make it that much easier to nab your dream home when it becomes available.
- In a nutshell, a home loan prequalification tells you how much house you can afford before you begin shopping.
- Because there’s currently a lack of inventory in the housing market, buyers need an advantage; prequalifying first could strengthen your offer by showing a seller you’re prepared.
Keep it simple: Use our free LoanFly app to prequalify remotely.
5. Do keep track of all your paperwork.
- After you prequalify, your loan officer is going to ask you for several important documents to get the loan process moving.
- Gather your Social Security Card, work history, employer information, pay stubs, bank statements, and tax returns to avoid scrambling at the last minute.
- At this time, it’s also important not to change bank accounts: Your loan officer needs to source your assets, which can be difficult when paper trails are inconsistent.
6. Do notify your loan officer of any big changes in your life.
- If you hope to get into a new home without delays, try not to rock the boat for a little while.
- Changing jobs, moving, and even switching insurance companies are all boat-rocking variables that could delay your mortgage approval and affect interest rates.
- Interestingly, closing a credit account can also count as a big life change — negatively impacting your credit score by altering scoring factors like your percentage of available credit and length of credit history.
Don’t waste your time making these 6 mortgage mistakes
If it all possible:
1. Don’t start house-hunting before you know what you can afford.
- Once again, that’s the beauty of getting prequalified. It’s quick. It’s easy to do online or via an app.
- And ultimately, it’s going to tell you exactly how much you can afford so that you don’t lose valuable time viewing houses out of your price bracket.
- Taking the steps beyond early prequalification to early loan approval is an even better bet in today’s still-booming market, helping you to gain a competitive edge by acting as a cash buyer.
2. Don’t take mortgage advice from just anyone.
- It’s a bitter pill to swallow. But it’s never a good idea to take your mortgage advice from a friend, a hairdresser, or even a real-estate-savvy neighbor.
- You’re making one of the biggest investments of your life. So, get your mortgage information and rate quote straight from the source — your lender.
- Homebuyers who are better informed are more likely to get better financial terms on their mortgage; you could save as much as $44,500 over the life of your loan just by shopping around and finding your preferred lender.
3. Don’t make any major purchases.
- Remember that thing about not rocking the boat? Buying a new car, appliances, or furniture before signing your home loan contract could impact your financial criteria for qualification.
- Taking on new debt signifies that you’re increasing your monthly obligations. Additional obligations may trigger new qualifications for a mortgage.
- If you have more debt, this could increase your DTI, or debt-to-income ratio. A higher DTI makes a loan risker; in some cases, a previously qualified borrower might not qualify.
4. Don’t apply for a new line of credit or loan.
- Likewise, taking out a new line of credit or a new loan, whether it’s for a car or education, can change your current financial picture. Changes in your finances may indicate instability and could delay or influence the loan process.
- It’s also critical that you don’t deposit cash into any accounts before running it by your loan officer. A lender needs to track your funds, and cash is hard to trace.
- Before making a cash deposit, talk with your loan officer. They’ll let you know how they’d like you to document the transaction.
5. Don’t drain your savings.
- All that money you saved for a rainy day can go toward your down payment and closing costs.
- If you have little-to-nothing in savings at the moment, we suggest checking out a big-picture budgeting app like Mint.
- Any cash you can set aside may help to offset the often-unexpected costs that arise when buying a house.
6. Don’t be a stranger.
- There’s no such thing as a stupid question. And there’s no wrong time to contact your loan officer.
- That’s what we’re here for. If you have any questions about your mortgage quote, or if you foresee any life changes coming up, give us a shout.
- We’re the professionals who can troubleshoot and keep you on track, helping you to reach your closing day on time.
Looking for a mortgage that fits just right?
Start by chatting with one of our friendly loan officers. We can walk you through the dos and don’ts, help you find a low rate, and save you from wasting time and money on the wrong mortgage.
*“Tell your clients: It hasn’t been this affordable to buy a house in years.” HouseLoanBlog.net, 2020.
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources are deemed reliable but not guaranteed.
You’re receiving this resource from your loan officer, who operates within the lending division of Cornerstone Capital Bank, a full-service financing institution.
Cornerstone Capital Bank is the parent organization that brings together multiple affiliated lending teams, providing shared resources, solutions, and long‑term support to help clients make confident financial decisions now and in the future.