Information on Mortgage Brokers Vs Banks

Getting a pre-approved mortgage is a significant step while purchasing a property.

You need the funds to complete the transaction, and this will not occur until you find a top-tier bank (lender) or mortgage broker. For those who are looking to choose a direction, it’s time to consider the pros and cons of each option.

Banks

Pros

1) Straight From The Source

Banks, like Wells Fargo, are ideal for those who want to do the negotiating on their own terms without anyone getting in the way. This is better for those who have been through this in the past or have a long history with a particular bank. It’s easier to get a good deal when you have that established relationship.

However, this is something that’s best suited for those who know what they’re doing and have the patience to adapt.

Those who don’t might end up in a situation where they get duped and left with a horrible loan.

2) No Fee For Broker

The broker is going to charge a fee, and that’s something you don’t have to deal with while doing it on your own. If you go to the bank, they’re going to deal with you and no one else. This means you’re cutting out the middleman and that is a good option for those who know what they’re doing.

Money saved can go a long way in increasing your down payment or saving it up for an emergency fund. This is up to you, and it is a positive a lot of prospective homeowners talk about while deciding between the two options.

Cons

1) Can Take Advantage of Your Inexperience

It’s not all rosy when it comes to banks and mortgages.

They can start to notice you’re inexperienced and they’re trained to find out if you are. When they do this, you’re going to be in a horrible spot, and it might be difficult for you to get a good deal. This is a significant investment and getting duped is hardly appealing.

2) Hard To Scout Multiple Deals

If you want to get the best interest rate on your mortgage, you want to make sure multiple deals are assessed.

This can be troublesome as you would have to reach out to each lender and that’s frustrating.

Mortgage Brokers

Pros

1) Huge Network of Vendors

Mortgage brokers are ideal for those who want to let their network go to work. Mortgage brokers do this for a living and have built up connections in the industry. They get the best rates because their network knows the client isn’t window shopping.

It saves time and gives both parties easier access to a good fit.

2) Do The Work For You

For those who don’t like the idea of visiting a bank and going through the details, it’s easier to trust a mortgage broker. As long as you choose a solid mortgage broker, he/she will take care of the negotiations.

Cons

1) Take A Fee For Their Service

There is a fee that comes along with the service, and this has to be accounted for. You’re not receiving the service for free. They are going to take a cut from the mortgage, and this is going to show when you sign up.

Pay attention to this fee before signing up.

These are the details you’re going to hear about when it comes to a mortgage broker or bank. It’s all about taking the time to vet both options and pick the one that suits you. Each person is unique, and that’s why the right answer is dependent on your priorities.

How to Find the Best Mortgage Broker

Shopping for a mortgage is a big decision and one that you should definitely put some time and thought into. For most people, a new home is the single biggest purchase that they will make in their lives, so it makes sense that they would want to get a good deal on it – and the difference in value between different mortgage packages can equate to tens of thousands of dollars over the lifetime of the mortgage.

When you are looking for a mortgage broker, there are many things that you should consider. Firstly, you will want to look at your credit rating. If you have a good credit rating, then you can get a good deal on a mortgage from a relatively mainstream lender – either a broker or your bank. If you have bad credit, then you can still get a mortgage, but you will be limited to buying from either your bank (since you have an existing relationship with them) or a sub-prime lender.

Check the history of the mortgage broker.  Do people actually like working with them?  This mortgage broker in West Covina has a 5 star-rating in yelp: Super Mortgage Bros Yelp Page.  Be sure to check what actual people have to say about them.  How about their Facebook page?  Some people opt to review businesses Facebook page instead.  As with our previous example, this West Covina Mortgage Broker has their Facebook page as well.  Be sure to check them all out.  Better safe than sorry.

Once you know what kind of lenders you are likely to be able to get a mortgage from, you can start to think about how much you can afford to borrow, and what sort of house you could get for that money. The days of being able to get a mortgage for the full value of a house are long gone. These days, you will need to put down a deposit to get a decent sized mortgage with a reasonable interest rate. There are some lenders that might offer high percentage Loan To Value mortgages, but you will get a far better interest rate if you can put down a deposit of 10-20 percent or more.

You should think about the kind of mortgage you are taking out. Do you want an interest-only mortgage (in which case, how will you pay off the mortgage when the loan ends? Will you be paying into a separate policy to pay off the loan?), or do you want a repayment based mortgage?

In addition, think about the interest rate. Do you want the mortgage to be fixed, or do you want it to be variable? Fixed rate mortgages tend to have a slightly higher interest rate at the moment that you take them out, but you know that for the duration of the fix the interest rate (and therefore your repayments) will remain the same. Variable rate mortgages will change with the economic climate – and so will your repayments. This means you are gambling that the mortgage repayments will either stay the same or go down. If interest rates increase massively, will you still be able to make the repayments? Remember that if you do not make the repayments, you may lose your home.

A good mortgage broker will work with you to help you find the best possible deal and to ensure that you are not taking on a mortgage that you would be unable to pay off. Ask the broker what packages they have, and what insurance they offer. Look at the policies they have for missed payments, and do everything you can to ensure that you are not going to end up being faced with a hefty penalty or no options for your mortgage to be temporarily paid if you fall upon hard times.

Another great resource are directory sites like Manta and SuperPages.  These directories list out different businesses by categories so it is sometimes easier to search.

With such a bit purchase, the philosophy of planning for the worst and hoping for the best makes sense. Ask your friends and family who they got their mortgages from, and speak to a financial advisor as well, so that you can get impartial advice tailored to your situation.

Information On How To Work Out How Much House You Can Afford

When working out the amount you are able to afford when you purchase a home is based on a few basic principles. One of the best ways to make this calculation is to use one of many bond-affordability calculators online to help you understand your affordability when it comes to home buying.

Your affordability is based on your after-tax salary, your monthly expenses (total), the loan term which is a number of years you have chosen to pay off the bond, and the interest rate are all used to make an estimate of the loan amount that you will be able to afford along with your monthly repayment amounts.

Great advice when it comes to buying your first home is to have in reserve, 3 months of housing payments along with your usual monthly expenses. This provides you with an added buffer to protect yourself from an unexpected event.

The Factors That Help Determine “How Much House Can I Afford?”

To make a decision on “how much house can I afford” the standardized rule involves that your expenses on a monthly basis do not exceed 36%. This 36% rule is associated with the division of your debt payments (monthly) and your mortgage payments (monthly) by your monthly income (gross).

The Key factors involved in calculating affordability are 1.) Your monthly income, 2.) The funds you have available to cover the closing costs and down payment, 3.) Your expenses on a monthly basis and 4.) Your current credit profile.

1. Income

Income is defined as money that comes into your bank account on a monthly basis or regularly like a salary or an income from your investments. This income is what assists in the establishment of a baseline in regards to what you can actually afford.

2. Funds Available

This is the cash amount that you already have ready to cover the closing costs and for a down payment. This can come from investments, savings or other types of sources.

3. Expenses And Debts

It is vital that you also consider your additional monthly obligations such as groceries, car payments, credit cards, insurance, utilities, etc.

4. Credit Profile

Your latest credit score along with the total debt amount that you already owe will have an influence on how the lenders will view your application as the borrower. These factors are also used to determine the amount of money that the lenders are prepared to borrow along with the interest rate that they will charge you.

The Costs Involved In Buying A Home

If you have made the decision that you would like to own a home, you will need to be prepared to convince lenders that homeownership is suitable for you. This will mean that your credit score needs to be in good shape and that you are not struggling with too much debt and that you can prove you have a cash cushion that is sizable for the expenses you will face.

Lenders look at a number of metrics to make a decision on whether you are regarded as a risk that is suitable for a 6-figure home loan. The amount that you owe in comparison to what you are earning which the lenders call a “debt to income” ratio plays a significant role in the process of approval. This also includes the down payment. For example, if you are unable to pay the standard 20% down-payment, you might be able to obtain a loan which requires a lower upfront payment. However, you may then face higher monthly payments and an increase in the costs associated with borrowing.

Tips For First Time Home Buyers

Being a first time home buyer is a nerve-wracking experience with a barrage of information directed your way.

It can become frustrating, confusing, and downright impossible for those who are looking to get through this phase without trouble. To make sure you’re not in a tight spot without a way out, it’s time to look at the most valuable tips for first time home buyers.

These are tips listed by real estate experts who have helped thousands of clients in the past in getting their new home.

With the aid of these tips, you’ll be able to maximize the process and find a great property.

1) Set Needs and Budget

What are you looking for from the property? Do you have a set budget in place? How much are you going to be putting as the down payment?

The best way to tackle this is to write a list of things you want from the property. Keep it simple and put everything down, so you have something to use as a checklist. When you do this, you make it easier to ignore all of the external noise that comes when you’re searching for a new property.

Keep it simple and also look to set up a pre-approved mortgage, so you have a proper budget in place.

2) Search For A Good Neighborhood

What property you get is ideal, but you also want to look at the neighborhood. Remember, your property is not in a separate world to the rest of the neighborhood. IF you don’t think about this, you are going to be in a lot of trouble as the area could harm the value of your property.

Think about things such as the quality of schools, crime rates, and other relevant information.

Even if this doesn’t apply to your right now, it is going to matter in the long-term when you’re looking to cash in on the investment or grow your family.
(Find 5 great tools to research your neighborhood here: https://www.safewise.com/blog/confirm-safety-neighboorhood-online-tools/)

3) Don’t Ignore Amenities

There are various amenities to look for while buying a new home such as appliances, landscaping, HVAC systems, and more.

It all adds up!

4) Pay Attention To Taxes and Costs

The property taxes are an expense but what about the closing costs with a real estate deal?

You are going to have costs come up such as the legal fees, title insurance, land transfer tax, home inspection fee, interest adjustment, and more based on the rules of the state. If you’re ignoring this as a first time home buyer, you’re in for a lot of trouble.

These costs pile up and can cost thousands of dollars in a heartbeat.

5) Inspect Property

You cannot go ahead and not get the inspection done before moving in. This is a must to ensure you’re getting a proper deal that is in line with the established contract. If you end up getting a property that has hidden damages and/or related problems, you want to get out in front of this.

You will have the ability to cancel the transaction as a first time home buyer, so don’t assume you’re left with nothing.

Take your time and make sure you don’t commit to a property without the home inspector coming in for a peek.

These are the tips all first time home buyers need to consider before buying a property. Yes, it is an exciting time in your life and a significant step forward, but that doesn’t mean it requires a lazy approach. Those who take their time here are going to enjoy the benefits for a long time to come.

It is one of the best ways to make sure the home buyer sees appropriate results and enjoys the process. It shouldn’t have to be confusing as long as you’re using these tips.

Is Better Credit = Better Mortgage Rates?

The credit score is the most influential determinant of the mortgage rate. The higher your credit score the lower (better) the interest rate on the mortgage.

How Do You Find Your Credit Score?

You are entitled to receive a free credit report each year from the 3 credit reporting agencies – Experian, Equifax, and TransUnion. The credit report does not include the credit score, but it reveals what information the credit bureaus take into consideration when calculating the credit score. You can obtain a free copy of the credit score through the credit card provider or bank.

This is a sample Credit Monitoring service by one of the credit bureaus, Equifax:

 

 

 

 

 

 

 

 

How Does Credit Score Affect Mortgage Rates?

High credit score borrowers typically enjoy lower mortgage interest rates than low credit score borrowers.

A high credit score is not only critical to getting a low mortgage rate but also influences whether you are able to get a home loan at all. Buyers under a particular threshold, usually a FICO score of 620 will find it especially difficult to secure a mortgage. It is possible, but they will need to do some digging.

A credit score of 740 or more usually qualifies for the best mortgage rates from the vast majority of lenders. The mortgage rates offered to the lowest and highest credit tiers can vary as much as one percentage point and a half.

What Do Lenders Look for?

Lenders generally prefer borrowers that have a long history of timely payments, low balances, as well as a mix of credit utilization – for example, an auto loan and several revolving accounts such as credit cards.

Lenders usually look at several variables on the credit report namely the outstanding debt, outstanding debt relative to total available debt, the length of your credit history, and the pursuit of new credit (the number of inquiries on your credit report).

How Can You Clean Up Your Credit?

You should ideally check the credit report about 1 year or so before you buy a home. This approach will give you enough time to correct the errors in your credit report and change the ways you can improve our score using credit.

Once you receive the credit report, scour everything from how your name is spelled as well as the previous addresses. You should also ensure that all accounts listed on the report belong to you and are reported correctly. If a particular account has been closed ensure that it is reported accurately.

Correct Any Errors and Wait

All the 3 credit bureaus have made it easy to dispute errors online. If everything is correct, you should pay down the balances the let time take care of the rest. Credit reporting agencies usually charge a fee if you would like to know your credit score. Lenders usually check all the 3 scores and use the median.

What Else Can You Do?

If you plan to buy a home soon, you should avoid applying for new credit. While it is not always avoidable – for example, if you need college financing or a car loan- you should try to avoid opening new lines of credit within a short time. Multiple new accounts can lower your credit score.

The Bottom Line

Is better credit = better mortgage rates? Yes, as clearly shown here. The credit score represents the overall credit history. It is based on the formation contained in the credit report that includes the total debt you carry and whether you pay your bills on time. Lenders usually consider the credit score as an indicator of how likely you are to repay the mortgage. Borrowers with high credit scores are considered less of a risk and are rewarded with better mortgage rates.