How many of you shop around for the best price on a new vehicle? How many of you shop around when considering a major purchase like new appliances, television, or computers? In today’s economy, more and more people are looking for ways to cut costs ― whether it’s home gardening, energy efficiency upgrades, or even coupon clipping, getting the best value for every hard-earned dollar is certainly foremost in most households today.
It used to be that automobile insurance companies, when agreeing to pay for auto body repairs, asked that you solicit written estimates from three (3) vendors prior to issuing a check for repairs. Recently, I had to purchase a new 3.5 ton heat pump for my home. The initial service technician, after troubleshooting my existing unit, declared it “unrepairable” and proceeded to quote me a new unit. I politely thanked him for the quote but indicated that I intended to obtain two more bids as this was a major expenditure. He became upset and insisted that if I didn’t sign on the dotted line that day, he’d have to charge me for a service visit. Needless to say, his company did not get the contract for the new unit and lost the service contract as well!
The majority of the above purchases are short term obligations. Why would you not consider shopping around for the best value when soliciting a mortgage loan and submitting a mortgage application? You are financing a major purchase for an extended period of time (most often 30 years) and it will be 20 years before you reduce the principal on a monthly basis equivalent to your interest payment! For the first 20 years of your mortgage loan, half of your payment goes toward interest!
It pays to shop around for the best deal when submitting mortgage applications. Also, many mortgage applications can at least be initiated on-line and the time and expense of traveling to several lending institutions is minimized.
Do your homework and be aware of any special mortgage loans that you may qualify for such as FHA, VA, & USDA loan programs and research the documentation necessary for submitting mortgage applications to these lenders.
When submitting multiple mortgage applications ask that a Good Faith Estimate (GFE) or the HUD-1 Statement be provided up front so that you can assess any additional costs that would be incurred at closing. This will give you time to review and negotiate waivers or reduction of fees. Know in advance what your FICO score is and what current interest rate that would qualify you for.
Let the potential lender know that you are shopping for the best value and rate when submitting your mortgage application. The current economy makes for aggressive competition among lenders and if you are a good credit risk, they will compete for your business. There are many factors that contribute to getting a mortgage application approved, including your credit rating, income, assets, debt obligations, and employment status. Make sure your finances are in order before your embark on mortgage application.
Finally, consider filling out mortgage applications with multiple sources ― local banks that you have an established relationship with (FHA, Credit Unions, etc.) and if you are considering purchasing a home for an investment, consider using your self-directed 401K or IRA as the vessel for investing.