How to Shop Online for a Mortgage
There’s a lot you know to know about how to shop online for a mortgage. It’s hard to imagine that there was a time before the internet, and how this process has changed since then. Today, there’s a wealth of information and resources available online so you can fully digitalize the process.
Buying a home is a big decision, but it’s also a very flexible decision. You can get the best financial deal if you’re willing to shop around. Like other major purchases, such as buying a car, the prices and terms are often negotiable. That’s why it’s essential you compare all costs and shop around for different rates before you make a final decision.
In this guide, we’ll discuss the best practices for shopping online for a mortgage. Even if you have no idea where to begin, we’ll set you on the path for success so you can feel confident in your decision.
1. Get Lender Quotes
The first step is to get quotes from multiple lenders. First-time homebuyers might not realize how normal it is to seek out multiple lenders in your early stages. Each one will have different rates, offers, and promotions, so it’s important to compare.
If you’re worried that multiple hard inquiries will hurt your credit, you can rest easy. As long as you do your lender comparison within 45 days, it will all be considered a single search on your credit history.
You can get a home loan from many types of lenders: thrift institutions, commercial banks, mortgage companies, and even credit unions. You can even work with a mortgage broker who will help you find the best deal. If you’re not sure where to begin, try these online comparison tools that will help steer you in the right direction:
- Bankrate Mortgage Lender Comparison
- NerdWallet Lender Reviews
- Consumer Financial Protection Bureau Interest Rates Comparison
2. Record Cost Information
Now that you’ve shopped around online for a few different lenders’ quotes, it’s time to take a closer look at just what you’re looking at. This can be the confusing part, especially if you’re not familiar with how mortgages work. Let’s break down a few terms to make more sense of what’s featured on each quote.
- Rates – What are the lowest rates currently being offered for your particular mortgage quote? Your rate will either be fixed or adjustable. A fixed rate means the interest stays the same during the duration of the loan while an adjustable rate will shift as the market changes. Ask how your rate might change depending on your down payment.
- Points – Mortgage points are any fees paid to the lender that can lower your interest rate. Ask for these points to be quoted as a specific dollar amount which will translate to how much you need to actually pay.
- Fees – Home loans usually include fees such as underwriting fees, broker fees, and closing costs. You should have an estimate of these fees.
- Down Payment – Finally, many lenders today will offer loans needed under 20% of the downpayment. However, you’ll need to purchase private mortgage insurance (PMI) if this is the case.
3. Negotiate a Deal
You should always feel confident negotiating a deal. Lenders expect this, and it’s completely acceptable to ask for more than was included on the initial quote. Lenders and brokers often offer different prices for the same loan terms on any given day.
One easy way to negotiate is to ask your lender or broker to waive or reduce one or more of their fees. You could also ask them to lower the rate or offer fewer points. If you’ve found a better quote elsewhere, use this as leverage to see if another lender can match these terms.
Once you’ve decided on mortgage terms that work for you, lock in the price. You do this through a written lock-in from the lender or broker. This includes the agreed upon rate, how long you have to act on the deal, and how many points are to be paid. There might be a fee for locking in the rate, but this is usually refundable when you close on the home.
Find the Right Mortgage Online
It’s important to remember that fair lending is required by law. According to the Equal Credit Opportunity Act, lenders aren’t allowed to discriminate against credit applicants for any reason other than your financial standing. No matter whether this is your first time shopping for a home or your fifth, feel empowered to educate yourself about the local rates and to ask for what you think is a fair price.
Shopping around for a mortgage isn’t a one-size-fits-all process. You might need to receive several lender quotes before you find the right deal. This is a normal part of the online shopping process. If you’re ready to find the right mortgage, start your online search today.