Applying for a mortgage is one of the most difficult, complicated, and time consuming financial transactions you’ll go through. It is also the most common with over $725 billion home loans originated in the first half of 2015 alone.
For the uninitiated it’s very easy to be sucked into the status quo of applying for a mortgage through a traditional brick and mortar lender. Or worse, an online lead generation site. Both options are far from perfect, usually involving misleading communication, aggressive sales tactics or cold calls bordering on badgering. If you’re looking for a great way to waste your free time, applying for a mortgage the traditional way cannot be beat.
That is why we put together this cheat sheet, which will help make your application process a little less hellish and keep you focused on the prize- a great financing option for your wonderful home.
Organize All Of Your Paperwork
This should be the first thing you do when applying for any type of loan; get your paperwork in order sooner, not later. With few exceptions and at the very least, your last W2, paystub, and bank statement are needed. If you're refinancing, add in your last mortgage statement and homeowner’s insurance declarations page. Snap a photo of your driver license too.
Doing this will make sure you hit the ground running and your sales rep will know that you mean business and they will not forget about you once the next hot sales lead comes in.
Avoid “Rates As Low As”
Don’t fall for the "rates as low as…" schtick. No one deserves the kinds of headaches these advertising tactics lead to. If it sounds too good to be true, it probably is.
Do Shop Around For The Best Mortgage Rate
Always do some research, and unless you’re 100% ready to move forward, window shopping doesn’t hurt either. Unless you really, really want 500 phone calls and emails per week, steer clear of lead generation sites like Bankrate, Lending Tree, and Lower My Bills.
If you’re a veteran be sure to steer clear of any sites masquerading as the United States Department of Veteran Affairs, they will fill your inbox faster than you can say “VA Loan.”
Just Say No To Suits
Avoid putting trust in people who wear ties to work. Rewind to 2008 if you need a refresher as to why that’s a bad idea. More than that it takes a lot of time to find a really nice suit, keep it looking crisp and sharp. It’s also expensive. That’s time and money that could be better spent elsewhere, like working to get you an amazing rate, or reducing closing costs.
Avoid Paying Someone Else’s Rent
One of the big reasons why banks charge more and take longer to close is because they need a reason to charge as much as they do. How else do they pay for their giant buildings and cheesy commercials?
Stay Away From Vanity Loans
No one cares who you got your home loan from. Don’t let the clever marketing tactics and prestige of banks convince you that their products are better. The only things that should matter to you are:
- Getting the lowest interest rate possible
- Saving thousands on closing costs
- A pain free experience that saved you hours of agonizing corporate paperwork, and bureaucratic b.s..
Leverage The Expertise of Real Estate Agents, and Mortgage Pros
Your real estate agent understands home values, and neighborhoods . Your mortgage professional understands your financial future. Don't let either step on the others toes. You wouldn't go to a mechanic to get your teeth cleaned.
Know Who You’re Talking To
Never forget that a mortgage loan officer is a salesman. They’re paid a commision, so it’s in their best interest to charge you more, no matter how nice or sincere they may be.
Make Sure Your Lender Aligns With Your Worldview
This may seem frivolous, but you will be spending upwards of several hundreds of thousands of dollars over the lifetime of your mortgage with the lender of your choosing. Shouldn’t there be more to the transaction than just money? If you care about the environment, and want a faster transaction, work with a paperless lender. They care about the environment too.
Find a lender that donates to charities, and plays an active role in supporting financial literacy, and not predatory lending. You’ll feel a lot better about cutting those checks.
Be Proactive About Loan Payments
When the deal is done, immediately contact your lender and convert your payments to "Bi-weekly." Doing so you will pay half the amount every 2 weeks as opposed to once per month, which will amount to tens of thousands of dollars saved in interest by paying the loan off early.
If you can add more to each payment, it will really speed things up. Say hello to early retirement!