Obtaining a mortgage loan seems like a relatively straightforward process, but because of the variety of options in the lending world it can sometimes feel like you are navigating the ocean in a canoe. A good way to ensure a great mortgage rate is to use two mortgage lenders during the process as a negotiation tool. A lender may be motivated to offer better terms if the borrower has excellent credit and income and is also working with other lenders.
Access and review copies of your credit reports from all three credit reporting agencies: TransUnion, Experian and Equifax. Additionally, purchase copies of FICO scores for you and your spouse. These three-digit numbers, which range from 300 to 850, reflect your overall creditworthiness. Understanding your own credit will help as you negotiate a mortgage with two lenders.
Research different mortgage lenders based on your creditworthiness and personal financial preferences. There are many different mortgage programs and repayment options, and understanding how each program affects your ability to repay is critical. For example, if you want a traditional conforming mortgage, you will need to avoid lenders who specialize in adjustable-rate mortgages or revolving mortgages.
Narrow the list of potential lenders to two companies or banks. A good strategy is to apply through a traditional lender, like a bank or credit union, as well as a mortgage broker, which might be able to provide more options. Banks and credit unions offer the most competitive programs, but brokers often can adjust rates and programs depending on how much you are willing to pay in fees.
Complete loan applications with both lenders and provide the loan officers (or brokers) with two recent pay stubs, income tax returns for the past two years and your homeowners insurance policy. This will expedite the underwriting and preapproval process.
Schedule meetings with each loan officer. Review the loan offer from the first lender, paying close attention to rate, type of rate, amortization schedule and rate-locking procedures. At your second meeting, review all of the same loan information. Determine which loan is most advantageous. Contact the loan officer of the lender offering the less beneficial offer and ask if she can match or beat the best offer.
Contact both lenders frequently during this post-underwriting time period. If you can get lenders to compete with one another, you may end up with a better deal than either or both of the original loan offers.
Close on the mortgage that best meets your financial needs and priorities. Make sure the closing paperwork matches the the final terms you discussed with your chosen lender.
Items you will need
- Two recent pay stubs
- Income tax returns for past two years
- Copy of homeowners insurance policy
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