Applying for a home loan can be overwhelming — what with the paperwork, credit requirements, terms and other banking jargon. But don’t be deterred. Just as you would comparison shop for any big-ticket purchase, do the same when it coms to loans. Various banks will offer you different rates and terms. Select the one that’s best for your financial situation.
There are the things you should do before going shopping, according to Charon D. Darris, VP and senior business banker for New York City’s, KeyBank Corp. “Know your credit scores and credit reports,” he said in an email. The three credit rating services are Experian, TransUnion, and Equifax. “These reports and scores can differ from company to company. It’s important you pull all three to ensure you have a comprehensive picture of your full credit profile and can proactively address any discrepancies you may uncover.”
Darris suggests using “an online mortgage calculator” to first do your calculations at home. “Most banks have a section of their website that will estimate what size loan you can handle given your income, property taxes, and other deductions,” he explains.
And before you hit the major banks, consider the smaller institutions. “Start with community banks. Often people start with the big names like Chase, Bank of America and Citi. However, underwriting standards and pricing are likely to be more negotiable at smaller financial institution,” advises Darris.
Now you’re ready to shop around. Here are a few tips from Darris on what you should ask each bank.
• Will you cover my closing fees? And if not, do you have a cap on closing fees?
• What is maximum tenor will you provide for my loan? (Tenor is the length of time until a loan is due.)
• What is the minimum down payment I will need to provide and when do I need it?
• Would an additional guarantor help the bank be more comfortable?
• Are there any government programs I qualify for?
Armed with knowledge, you’re ready to haggle for the best deal.