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As of December 19, 2017, MyQL is now referred to as Rocket Mortgage.

If you’re looking to buy a home for the first time, there’s a good chance that you’re a novice when it comes to shopping for the right mortgage. You may have heard terms like 30-year fixed and ARM thrown around, but here’s your chance to get an inside view from a banker’s perspective. A home loan is likely the largest financial investment you’ll ever make in your lifetime, so it makes sense to do some research ahead of time.

I recently chatted with Andrew Bow, a President’s Club Power Banker with Quicken Loans. Since he’s been a Home Loan Expert for nearly five years, he has some valuable insight of first steps to take for people beginning to shop for a mortgage.

Get Clear On Your Goals

For starters, Bow suggested getting clear about your home-buying goals and what makes now the right time for you to buy.

“Get an understanding of your motivation. Some people are just looking to buy an investment home, while someone else may want a home to start a family,” he said. “Also, nail down the area that you’re interested in living in to get a sense for market pricing.”

Prospective buyers should start talking to real estate agents, family and friends to learn about their experiences; it’s a great way to help you learn about specifics to your area, such as the type of insurance required and average cost of utility bills, Bow said.

“You don’t have to have previous knowledge about what the housing market’s doing because your mortgage banker should be able to tell you about that,” he said. “But, you do need to know your numbers and how large of a down payment you’re comfortable making.”

Look at Your Credit

Bow suggests taking a hard look at your credit score, income and assets so you’re aware how much you can afford. Lenders use your credit score to determine whether you qualify for a loan and what rate you’ll be charged. Generally speaking, the higher your score, the better the mortgage you’ll be offered.

“A lot of this process boils down to a buyer’s level of awareness about things like credit,” he explained. “I suggest using websites like CreditKarma.com so you take a look at your credit report.”

It’s smart to pull your credit report at least six months prior to buying a home so you have time to correct any errors you find on your report. He also suggested using technology to simplify preparation to buying a home.

“These days, there are plenty of tools out there to help people when it comes to mortgage shopping,” he said. “For instance, Quicken Loans has a phone app to help you evaluate loan options, as well as mortgage calculators you can use to help you know the amount of taxes you’ll be looking at.”

Prospective home buyers should have a good sense of how much they want to borrow and how long a term they’ll need to compare lenders.

Check Out Company Profiles

Bow emphasized that the shopping process really comes down to finding a company and mortgage banker you trust. You need a certain level of comfort and confidence in a company’s track record of customer service, he said.

“I always start off by reassuring clients that my company has an A+ rating with the Better Business Bureau and is ranked by J.D. Power and Associates,” he said. “We also use a website called Social Proof where prospective clients can go online and see what recent clients have said about me. This lets them see for themselves what level of service I’ve provided in the past.”

He suggests looking up the Nationwide Mortgage Licensing System (NMLS) number of the lender and mortgage banker, too. Each banker and firm in the industry have a unique number assigned by the NMLS. This trackable number helps to improve transparency in the residential mortgage market from state to state.

“There are literally hundreds of mortgage lenders in the market. And people usually are looking to have a lot of trust and the least amount of fees,” he said. “It’s really important to take the time to look up a company’s credentials and the banker’s NMLS number. You want to be sure that the person who is handling your finances has the proper licensing.”

Mortgages are available from several types of lenders, including commercial banks, credit unions and mortgage companies. These institutions likely are offering different interest rates, promotions and loan products.

Consider Mortgage Types

When considering the type of loan product you’ll need, consider how long you plan to live in your new home, along with your credit and the amount of funding you’ll need.

The three most common mortgage types are the fixed-rate mortgage, the adjustable-rate mortgage (ARM) and a Federal Housing Administration loan (FHA).

A fixed-rate mortgage is a conventional loan that has a set rate of interest for the term of the loan.

An ARM is a conventional loan with an interest rate that changes periodically, usually in relation to the financial markets. The initial rate is often lower than a fixed-rate, and the rate may change at any time after the introductory period.

An FHA loan typically has relaxed borrowing requirements with a low down payment, reasonable credit expectations and flexible qualifying income requirements.

Other mortgage options include the following: VA loans for active-duty military personnel, veterans and their families; jumbo loans for mortgages larger than $400,000; and reverse mortgages, which are a special type of home equity conversion mortgages for homeowners age 62 or older that require no monthly payments.

Assess Rates and Fees

Shopping around is part of the normal process because you’ll want to go with the institution giving you the most competitive interest rate. The lowest advertised interest rate may not always be the best option since fees can significantly increase the cost of a mortgage. In general, a mortgage with higher fees has a lower interest rate.

“I’ve found that people always want to get a good deal; that’s how it is when buying anything in America. Buying a house isn’t any different,” Bow said. “But part of getting a good deal is building a relationship that you feel comfortable with as well.”

When shopping around, it’s important to give each institution the exact same information and numbers. Work with the banker to compare longer and shorter terms so you get an idea of the variation in interest rates, fees and monthly payments. Ask about the underwriting fees (costs associated with loan processing and paperwork), broker fees, settlement costs and closing costs.

“There really are no such things as dumb questions when it comes to buying a home,” Bow said. “Be sure to share all of the questions on your mind: That’s what your mortgage banker is there for. They should have the training and experience to reassure you that you’ve made the best decision.”

Remember to do the necessary research and question-asking before deciding to buy a home. These steps will help educate you on this sometimes-complex process and empower you to negotiate and ask smart questions. This will help ensure that you’re getting the best deal possible.

To learn more about the mortgage products that Quicken Loans has to offer and find the one that’s right for you, call a mortgage expert today at (800) 251-9080.

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This Post Has One Comment

  1. I really like what this article says about making sure you have goals when buying a home. My wife and I just had a baby and we are looking to find a place that our kids can grow up in. With that goal in mind, I can definitely see how that would be an important thing to have good goals and make sure you explain them to your mortgage company.

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