Compare Mortgage Loans

June 2021
Results for - June 2021
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Purchasing a mortgage is an exciting long-term investment, but the process can feel overwhelming, especially if it’s your first home.
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Mortgage purchase explained

A mortgage is a type of loan that you can get from a bank or other lender to help you buy a house or other property. Mortgages come with various interest rates, down payments, and terms—all of which can vary depending on the lender.

A down payment on your mortgage is the money you pay upfront when buying a home. The lender will fund the rest.

You’re likely to get approved for a mortgage purchase with a 20% down payment, but you can still put down less depending on a few factors, like the type of mortgage, the lender’s requirements, and your credit history.

Securing a down payment can feel like a roadblock for mortgage buyers, and while there are benefits to larger down payments, buyers can certainly put down much less.

Mortgage interest rates started to rise

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Types of mortgages

When it comes to mortgages, there are two primary types: There are government-backed loans and conventional loans. A government-backed loan means it’s insured by the government, which removes the risk for lenders in the case of a borrower defaulting on the loan.

A conventional loan is more risky for lenders because it doesn’t have that safety net the government provides. So you can expect the interest rates, fees, and even down payment to be higher.

Financing for a borrower’s existing home

Home equity loan

Home equity loans are secured loans that use the equity of a property as collateral. This type of loan sometimes called a second mortgage, is used for all types of real estate transactions, including purchases, home improvements, and refinancing.

Lenders offering mortgage loans will often also include home equity loans as an option for individuals looking to purchase a second home or property.

Conforming mortgages

As its name suggests, a conforming loan is one that conforms to the financial specifications and guidelines put forth by the FHFA and other government entities like Fannie Mae and Freddie Mac.

These guidelines include things like debt-to-income ratio (DTI), credit scores, minimum down payments and more. They typically come with lower mortgage rates than loans backed by the government.

Non-conforming mortgages

Non-conforming mortgages don’t follow the rules and guidelines set for conforming mortgages, so you can expect these loans to come with higher mortgage rates, but they’re also easier to acquire.

Conventional mortgages

Conventional mortgages include all types of mortgage loans that aren’t secured by the government. To qualify for one, applicants must have a minimum FICO score of 620 and a minimum down payment of 5%.

Paying less than 20% on a down payment, however, means borrowers will be required to pay private mortgage insurance (PMI) premiums on their loan, which will only end when the equity in the home reaches 22% of the value.

With conventional mortgages, there are also appraisal and origination fees borrowers will typically need to pay and DTI requirements, depending on your credit score.

Government-insured mortgages

These secured mortgages include a variety of loans, VA loans, USDA loans, and FHA loans, which must meet the requirements set by the Federal Housing Administration (FHA).

VA loans

VA loans are specifically designed for military members and their families. It comes with some great perks, like a $0 down payment for a mortgage and no PMI, as long as applicants meet the eligibility requirements.

FHA/HUD loans

These types of loans require borrowers to make a minimum down payment of 3.5% and have a minimum FICO score of 580 to qualify. Borrowers may still qualify with a lower credit score, but they’ll need to make a higher down payment.

USDA loans

These loans are for homes in rural areas and are guaranteed by the U.S Department of Agriculture (USDA). Applicants with a low income can be eligible for this loan type to purchase, buid, or renovate a home located in specific regions in the United States.

With USDA loans, all mortgage expenses and closings costs are combined into the loan to minimize the standard out-of-pocket loan costs. Other qualifying requirements may vary, depending on the lender.

How you can get a mortgage

Get a pre-qualification or pre-approval letter

This is a document you can get from a lender that states you’re pre-approved for a loan, and may also include the loan amount. However, this doesn’t mean the loan is guaranteed since an applicant’s pre-approved status is based on assumptions that still need to be verified in the application process.

While not always necessary, it’s good to have this document to present to potential sellers as a sign of good faith that you’re serious about purchasing their home. It lets them know that you have a lender lined up and that you can afford the home.

This document does not tie you to a lender. You can still shop around to find the best mortgage loan rates.

Companies like LendingTree allow you to quickly and easily compare the rates of several lenders at once online. LoanDepot and AmeriSave, while not lending marketplaces, do allow applicants to get fast quotes online without a hard credit check.

Gather the necessary documents

Once your offer on a home is accepted, you can then move forward in gathering all the necessary documents for your lender, which can take time.

Here is what you’ll need:

  • Recent W-2 forms and pay stubs
  • 1099s for those who own a business, including profit and loss statements
  • Information on all debts, like monthly payments and amounts, still owed
  • Lists of assets, like savings, investments, and retirement accounts
  • Tax returns from the past two years

Depending on the lender, there may be some additional information and documentation you’ll need to submit.

Good Faith Estimate & Truth in Lending disclosure

Within three days of being approved for a mortgage loan, you’ll receive a Good Faith Estimate (GFE) from your lender that includes all the costs involved in securing the loan.

The Truth in Lending disclosure will contain information about what you’re required to pay and the terms of the loan, like the APR, fees, and underwriting costs.

How to choose the best mortgage lender

While you can secure a mortgage from a traditional financial institution, like a bank or credit union, online lenders will often have competitive rates and looser requirements, which can make getting a loan easier and cheaper.

When searching for online lenders, it’s important that they offer the type of loan you’re interested in, like a VA loan, USDA loan, FHA, or other loan. Not every lender has the same product offerings.

Conduct research on the lenders you find to ensure that they have experience in the industry, good customer service, and no hidden fees.

A good lender will always be transparent about the costs and fees involved in securing a mortgage, and be willing to walk you through the process.

It’s also worth keeping in mind that every lender has varying requirements, fees, and interest rates, so take time to shop around to find the best deal.

Traditional lender vs online mortgage lender

What’s great about doing business with an online lender is that everything can be done online. There’s no need to speak with someone in person or step foot in a branch. You can submit your documentation electronically and complete your application online.

Additionally, many online lenders offer guidance throughout the process so you’re not left on your own, just as a traditional bank lender would, except it’s done through online communication and via phone.

With traditional lenders, the process can also take longer due to the amount of paperwork involved. The process is less streamlined than when everything is online.

Best of all, with online lending, you have the ability to shop around and compare rates right from the comfort of your home. Online lenders allow you to submit some basic information about yourself to see what rates you qualify for, making it easy to compare lenders side-by-side and get the best rates on a mortgage. And once you’re ready to move forward with an offer, you can finish the process online.