Tips for shopping for a mortgage

When you imagine your dream home, you probably think about the kitchen or bathrooms or outdoor space – you’re probably not daydreaming about your mortgage. However, shopping for a mortgage shouldn’t be overlooked in the house hunting process, and there’s much more to shopping for a mortgage than just doing a Google search and finding the lender with the lowest rates.

From easy ways to help determine how much you can afford to what extra fees to look out for, here are some tips on shopping around for a mortgage:

What you’ll learn

• Determine how much you can afford
• Establish a timeline
• Getting mortgage quotes from multiple lenders
• Other fees and requirements

Determine how much you can afford

Before you start shopping for a mortgage, you’ll need to put together some basic but pertinent information to make it easier to get mortgage quotes. First, figure out the maximum purchase amount you can afford – use a simple mortgage calculator to help you – and your estimated down payment amount. Note that lenders typically price their mortgage loan programs based on your down payment percentage (0%, 3%, 5%, 10% and 20% or above), not the actual dollar amount.

Establish a timeline

Next, determine an estimated timeframe when you plan to purchase your new home, the property type you’re interested in, such as a single family home or condo, and whether you’ll be using the property as your primary residence, a vacation home or an investment property. And of course, you’ll want to know your credit score.

Getting mortgage quotes from multiple lenders

When requesting a quote, some lenders may perform a hard credit inquiry, which could negatively impact your credit score. However, some lenders, like Alliant, have rate tools on their website so that you can estimate your rate before formally applying and having your credit pulled. When that is the case, there is no harm in getting multiple quotes, comparing them, and then requesting an official quote from a lender or two.

Because the process can feel overwhelming, start by getting quotes from three different lenders, plus your existing bank or credit union, if they offer mortgages. Also, each individual lender should give you multiple options to consider. Typically, a lender will show you their 30-year fixed mortgage rate, which tends to be the more popular option. But, if the loan officer has asked you questions and gathered information based on your specific situation, they should also be able to give you one or two alternatives to consider. For instance, they might give you an option between a 10-year adjustable rate and 30-year fixed rate. If they don’t give you these options right from the beginning, don’t be afraid to ask.

Other fees and requirements

In addition to looking at which lender can give you the best rate, there are several other factors to consider when shopping for a mortgage.

Ask lenders about any fees they charge and estimated third-party costs, like appraisal or legal fees. Some lenders may charge one flat fee for loan originations for all of its mortgage products, but others may break their fees into categories like origination, underwriting and processing.

Also, if you are putting down less than 20%, ask the lender if they require you to have private mortgage insurance (PMI) or to escrow funds for property taxes and home insurance into your monthly payments.

Another consideration is the lender’s process. You want to make sure you close on time once you go under contract, so if the lender can’t lay out a streamlined process to ensure it will happen, that could lead to major headaches down the road.

Shopping for a home loan can feel confusing, but don’t be afraid to ask your lenders any questions you have, they are here to help. Learn more about Alliant mortgages.