June 21st, 2011 9:17 AM by Eileen Denhard
Plan Ahead – It’s hard to comprehend how a six-figure purchase will fit into your overall budget. Get a reality check by using mortgage calculators to figure out how much home you can afford, what your monthly payment will look like, and how much income you’ll have left over after paying your mortgage. Zillow’s brand-new Zillow Mortgage Marketplace iPhone App helps borrowers quickly answer these types of questions. When you’re out shopping for homes, this is an easy way to avoid sticker shock once you start the financing process. Understanding how a mortgage will fit into your financial situation will set you up to shop with confidence.
Use Your 30-Day Window - Some people may avoid mortgage shopping, fearing their credit will be impacted when multiple parties check their credit within a short period of time. What they don’t realize is that most credit score calculations won’t penalize you for rate shopping, as long as you do your shopping within a certain period of time, typically 30 days. All inquiries made within that 30-day window will be treated as a single inquiry and your credit score won’t be affected during that time. After you’re done rate shopping, those multiple inquiries will be treated as a single inquiry rather than several separate ones. So take advantage and shop around for the best lender!
Lenders don’t need a name to get an accurate quote - Another fear of would-be mortgage shoppers is that they’ll have to share their name, address and phone numbers with various lenders, and will then to have deal with the sales calls that follow. The truth is lenders don’t need your name or phone number to give you an accurate quote; they just need you to provide them with accurate information about your financial situation like your credit score. Any site or company that is asking for this information, before giving you quotes, is likely selling it to the highest bidder. So, unless you like talking to lenders during dinner, don’t comparison shop on these sites.
Look beyond the rate - When comparing different loan quotes, don’t fixate on the rate over everything else that goes into your home loan. To ensure you are getting the best loan for your situation, you need to compare the APR, the monthly payment (to make sure the loan fits into your budget), lender fees ( which are negotiable), the total cost of the loan (interest+ fees, over time) and lender reputation. A site like Zillow Mortgage Marketplace allows you to compare these quote details on an apples to apples basis, something that is hard to do when calling various banks and brokers (since one lender may include fees in a quote and another may not).You also need to understand the loan program you are being quoted, and how it works. Is it fixed over a set period of time, or will it adjust to a higher or lower rate, after say 5 or 7 years?
Understand Points – Whether or not you should buy discount points really depends on how long you plan to stay in the home. The longer you plan to stay in your home, the more attractive buying points becomes. Use a discount points calculator to help you do the math.
Hire the Right Lender – Many people forget that you are hiring a lender to perform a service. You actually have a choice as to who you work with, and who you pay (via lender fees) to work with. To that end, hire someone who has demonstrated outstanding levels of service to other borrowers and who has a reputation of locking in loans on time. Check out lender reviews to find the lender you’ll feel most comfortable working with.