Land a Mortgage Like a Pro: Three Easy Steps

You wouldn’t think of overpaying $50,000 when buying a new house, but you could pay that much extra if you’re not careful shopping for a mortgage.

If you can knock just one point off a mortgage — lock in a 4 percent interest rate instead of 5 percent, for example, for a 30-year term — you could save enough to put your kids through college or retire earlier.

Check out mortgage shopping tips from Money Talks News savings expert Stacy Johnson in the video below, and then keep reading for more advice on finding the right home loan.

Step 1. Polish your credit

To get the best mortgage deal, you need a spotless credit history. This boils down to concrete numbers.

“We literally are told by the credit companies we pull from what the potential rise in their score could be and what actions they have to take to get it there, and we coach them to do that,” says Tina Mulligan, regional sales manager at The Mortgage Firm in Pompano Beach, Florida.

Start polishing your credit score months or even a year ahead of applying for a mortgage.

“There is no quick fix for bad credit scores,” warns Experian, a global credit-reporting firm.

As money expert Stacy Johnson advises in this Money Talks News video about raising your credit score, go to AnnualCreditReport.com, get a free copy of your history and check for mistakes or other negatives appearing on your account. Also, pay down debt so your balances are 30 percent or less of your available credit. You could also ask current lenders for higher credit limits.

However, don’t open new accounts just to show a larger amount of available credit, warns Experian. Lenders may think that those applications for new credit cards mean you’re taking on more debt. And don’t close unused credit accounts, because that will lower your available credit while raising your credit-utilization rate.

While many factors go into your credit score, the most critical is paying your bills on time, Experian says.

Check out Credit Restoration in the Money Talks News Solutions Center for more help, or check out this mortgage tip worth up to $50,000.

Step 2: Shop smart

The Internet makes it easy to learn about and compare all types of loans from dozens of lenders.

Home loans are available from thrift institutions, commercial banks, mortgage companies, credit unions, and mortgage brokers, who match you with a lender rather than lending money to you directly, the Federal Trade Commission says.

Learn about all costs affecting the loan, says the FTC, which offers a worksheet. It highlights these primary considerations:

  • Down payment: Know how much you can afford. While 20 percent of the purchase price is a good benchmark, some lenders require only 5 percent. Some government-assisted programs, including FHA (Federal Housing Administration) and VA (Veterans Affairs) loans, may require substantially less than the benchmark.
  • Interest rates: Compare fixed or adjustable terms. Make sure the loan’s term is stated as annual percentage rate (APR), and find out how long the rate you’re quoted will be available, because rates can change daily.
  • Points: The fees paid to the lender or broker for the loan may be linked to the interest rate. The more points you pay, the lower the rate. Ask for points to be quoted to you as a dollar amount, rather than just as the number of points, so that you will know how much you will actually have to pay.
  • Fees: A lender may charge for loan origination or underwriting, brokerage and settlement (or closing costs). Every lender or broker should be able to give you an estimate of its fees, the FTC says, adding, many fees are negotiable. Some fees are paid when you apply for a loan (such as application and appraisal fees), and others are paid at closing. If you borrow money to cover the fees, the amount will be added to your loan, adding to your costs over 30 years.

Step 3: Make a deal

Choose three to five lenders, pick up the phone and talk to them. Compare their rates and their fees. Pit those lenders against each other. You can track their terms on this FTC worksheet.

FTC Mortgage Shopping Worksheet sample
FTC Mortgage Shopping Worksheet sample

Ask lenders or brokers if they can give you better terms than the original ones they quoted or than those you found elsewhere — and make sure they don’t, say, lower one fee while boosting the interest rate to make up the difference.

Ask if the price contains any overages, the difference between the lowest available price for a loan product on any given day and any higher price you may agree to pay. The loan officer or broker can pocket the difference.

Once you’ve homed in on the best possible deal, get your pre-approval for that loan.

Most lenders will allow you to lock rates for 30 to 45 days. But be sure you can close the property within that window. If you can’t, continuing the lock could cost extra. So when you’re negotiating your loan and fees, consider attempting to negotiate a longer lock as well.

Now go get that home of your dreams.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
10 Food Staples That Are Easy and Cheap to Make Yourself
10 Food Staples That Are Easy and Cheap to Make Yourself

Making any of these key foods yourself will improve meals — and your budget.

3 Cable TV Companies Hiking Prices for 2021
3 Cable TV Companies Hiking Prices for 2021

Still married to your cable company? Hold on to your wallet!

8 Surprising Things No One Tells You About Retirement
8 Surprising Things No One Tells You About Retirement

Knowing what to expect can help you prepare for — and adjust to — life in your golden years.

9 Products That Will Organize Your Home for Under $45
9 Products That Will Organize Your Home for Under $45

These clever Amazon finds can help transform a messy nest into the pristine home of your dreams.

The Worst Nursing Homes in America Are Revealed
The Worst Nursing Homes in America Are Revealed

The nursing homes with a history of providing subpar care previously hadn’t been identified for a government list.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Whether you resell it for a big profit or add it to your own wardrobe, this type of clothing is a hidden steal.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

Organize Your Home With These 10 Thrift Store Finds
Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

11 Laws You Could Be Breaking Without Knowing It
11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

Is This Treatable Condition Causing Your High Blood Pressure?
Is This Treatable Condition Causing Your High Blood Pressure?

Researchers say too many doctors are overlooking this potential source of hypertension.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

Taking a Multivitamin? Here’s Why You Should Reconsider
Taking a Multivitamin? Here’s Why You Should Reconsider

A new study has bad news for the millions of Americans who spend money on multivitamins.

Does Wearing 2 Masks Protect You Better From COVID-19?
Does Wearing 2 Masks Protect You Better From COVID-19?

A growing number of people are wearing two masks instead of just one. Should you join them?

21 Items to Cut From Your Budget That You Won’t Even Miss
21 Items to Cut From Your Budget That You Won’t Even Miss

Start off the new year by implementing these small-but-smart savings strategies. They’ll soon add up.

Internet Providers Can’t Charge You for This Anymore
Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

This Surprise Factor Can Raise Your Risk of Dementia
This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

15 Painless Ways You Can Cut Costs in 2021
15 Painless Ways You Can Cut Costs in 2021

Follow these tips to save, so you’ll have money for things that really matter.

10 Cars You Are Most Likely to Keep for 15 Years
10 Cars You Are Most Likely to Keep for 15 Years

The cars that owners hold onto the longest have one thing in common, a new study shows.

These 10 Postal Price Hikes Start Next Week
These 10 Postal Price Hikes Start Next Week

Starting on Jan. 24, the price of various mail and shipping services will rise.

Prepare to Pay More for These 31 Drugs in 2021
Prepare to Pay More for These 31 Drugs in 2021

More than 700 prescription medications have seen price hikes so far this year. Here’s a look at the worst.

The 10 Golden Rules of Becoming a Millionaire
The 10 Golden Rules of Becoming a Millionaire

I’m a millionaire several times over. I got here the same way you can — by following these simple steps.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.