How To Get The Best Loan Offer
By Paul Esajian on June 14, 2019
Getting a loan can be an overwhelming experience. Regardless if you are a seasoned investor or a first-time homebuyer there are plenty of terms and jargon that can be intimidating. Knowing what to look for and the right questions to ask can save you thousands of dollars and put you in the best possible loan.
On every transaction there are a handful of fees and costs you can negotiate. Even if you have a rate and term you are comfortable with, you still have the right to question certain fees. If you finance five deals a year saving a little on each closing can add up to thousands of dollars in savings when you file your tax return. Here are five tips to help get the best loan offer for you.
- Know Your Deal: All loans are not created equally. A self-employed borrower with 10% down is different than a W2 employee putting down 20%. Before you apply for any loan you need to know and understand your deal. Start by obtaining a copy of your credit report. It is a good idea to enroll in a credit monitoring service that provides monthly updates to your report. This way, you know every liability and potential issue with your report prior to applying. Instead of trying to remove an old account you can start the process without any snags. You will also know your exact credit score and liabilities. This allows you to calculate your debt to income ratio and know which credit bucket you fall in to. If your application is strong you will have more options and more room to negotiate. On the flip side if your application is weak, there will be fewer options and you will be forced to scramble to find the right program. Always know your deal and where you stand prior to applying for any loan.
- Shop Around: One of the biggest myths and misconceptions in the loan process is how many times you can have your credit pulled. Yes, the more times it is pulled the lower your score can potentially get. However, it would need to be pulled over five times in a 30-day period before there is any damage. Having a company or two pull your credit will not lower your score. If you are still worried about this, you should ask for a copy of your report from the first company you allow pull it. Use this report with any subsequent companies you talk to. Unless the first company checks all the boxes with what you are looking for you should always shop around. You want to see what other options may be out there and if there are any major differences. You should talk to a local bank as well as a mortgage broker. Your local bank can excel at basic high down payment, strong credit score deals while a broker may have options you didn’t even realize were available. Always shop around until you are completely comfortable with your options.
- Review Fees: Plenty has changed in the mortgage industry over the last decade. Prior to the mortgage collapse a borrower was given a good faith estimate and hoped the estimate matched the fees at the closing. Today, there are several safeguards in place that ensure a borrower knows exactly what they are getting into every step of the way. Instead of a good faith estimate you will receive something called a loan estimate within three days of your application. By law, these fees cannot be more than what you will see at closing. You should take your estimate and shop it around to other lenders. Before you do you should know if you want to pay a slightly higher fee to get a lower rate and vice versa. From there you can compare apples to apples and look for the best possible deal.
- Negotiate: You never know what you can get unless you ask. There are several places you can potentially lower your fees if you simply try. Anyone from your real estate agent, mortgage broker, attorney and even the seller can be an opportunity to save money. You can see if there is a chance to get a credit from the seller. Possibly, your real estate agent will knock down their commission. Your mortgage broker may lower their fee and the same with your attorney. Never go back on your word but if nothing is concrete you should always ask if there is any room for negotiation.
- Understand Objectives: If you are in the real estate business, you most likely understand that there are times when you should pay for quality. Saving a few hundred dollars by using an attorney who doesn’t understand real estate closings is not the best strategy. You need to understand the big picture and pick and choose your battles accordingly. Getting your mortgage broker to pay for appraisal is a great way to save money. However, using a lender that doesn’t specialize with self employed borrowers or investment loan programs is not a smart strategy. By understanding what you want from the deal and the strength of your application you will get the best deal for you.
It sounds obvious enough, but if you have questions go ahead and ask them. If your lender doesn’t want to answer find someone who will. With just a few simple tweaks or changes in negotiation you can get the best loan deal for you.