Finding an affordable house is no longer a problem but qualifying for a mortgage can be. Here are six tips to getting a mortgage and a good rate.
1. Put your credit on ice. The higher your credit score, the lower your rate: The best rates go to those with a 760 or more, says credit-score expert John Ulzheimer. So keep that plastic in your wallet (and don’t apply for new cards or other loans) for at least three months before you go loan shopping. One large balance — even if it’s paid off at the end of the month — can ding your score by 20 points or more.
2. Ask for time. Most sales contracts give you only 10 days to nab a loan or the seller can move on. Negotiate for an additional five to 10 days to give you some room to shop around.
3. Get at least six quotes. Rates on a 30-year fixed conforming loan can vary at least as much as a quarter of a percentage point. Get quotes from national lenders at mortgagemarvel.com and find out what your local credit union or regional bank is offering as well. Inquire about fees; while lenders aren’t required to give you a good-faith estimate of closing costs (which average 2 percent of the loan balance) until you actually apply, some will provide it if you ask.
4. Match the lock period to the loan. You now need 60 days or more to close a loan, says Wharton professor and mortgage expert Jack Guttentag of mtgprofessor.com, and getting an extension on a lock will cost at least a couple of hundred dollars. Ask your lender how long it’s taking to close loans like yours — and don’t lock for less.
5. Opt for an ARM. If you know you’re not going to be in a house for more than seven years, adjustable-rate mortgages can mean big savings, says Guttentag. The monthly payment on a $300,000, seven-year ARM at the recent rate of 3.23 percent is $1,302, vs. $1,455 for a 30-year fixed at 4.13 percent.
6. Talk to a broker. Those who need a jumbo loan or have an unusual situation (say, you’re self-employed) will get the best deal from a mortgage broker who has access to and experience with a lot of lenders. Find a fee-only one at upfrontmortgagebrokers.org.