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May 27th, 2022
July 12th, 2022
A mortgage is a type of loan that is used to finance a home purchase and gives your lender the right to take your property if you fail to make your payments. Most homebuyers need to get a mortgage, unless you can pay for the full cost of the home out of pocket. Julie Aragon, a trusted mortgage expert at Julie Aragon Lending Team, explains that getting a mortgage should always be your first step in the homebuying process: “Talk to a licensed loan officer (aka mortgage lenders) as soon as possible (definitely before you fall in love with a property) so you can understand how much you can qualify for and what types of up-front and monthly payments scenarios you'd be looking for at different purchase price points. If you're already using a real estate agent, get a recommendation from them.” To qualify for a mortgage loan, certain eligibility requirements must be met, including having a good credit score (generally at least a 580), and a low debt-to-income ratio of less than 50 percent. How does a mortgage work? Like other types of loans, your lender gives you a set amount of money that you are required to pay back over a set period of time. In addition to your loan balance, you will also be required to pay interest on your loan, which will be determined in large part by your creditworthiness and how much of a risk you pose to your lender. In most cases your home is used as collateral, meaning that the lender has the right to foreclose on your property if you miss a mortgage payment — foreclosure generally doesn’t occur until you’ve missed two or three consistent payments. How do I get a mortgage? Getting a mortgage can seem like a daunting process, but it really comes down to choosing the right lender and mortgage loan type for you. 1. Check your finances Because your mortgage interest rate and ability to qualify for a mortgage is reliant upon your creditworthiness, it is important to check your credit score. You may even need to work to improve it if possible, allowing you to get better rates and terms. Andy Kolodgie; Owner of The House Guys Industry Expert Two important things when qualifying for a mortgage: The two most important things when qualifying for a mortgage are credit score and debt to income (DTI) ratio. However, there are a multitude of other requirements that you can get caught up in (such as a minimum 2 year job history). Your DTI ratio ideally needs to be 43% or less but certainly no more than 50%. In terms of credit score, the higher the better — but any higher than 760 won’t make a difference for qualifying). The minimum credit score (unless you’re doing a VA loan, which has no minimum) is 540. While there are mortgage options if you have bad credit, doing what you can to ensure that you have a healthy credit score could save you a lot of money in the long run. In most cases, you should strive to have a credit score of at least 700. 2. Determine what you can afford It is important to take stock of your finances, make a budget, and crunch some numbers so you know how much money you will need to buy a house, including a down payment and closing costs. Ensuring that your finances are in order could save you time in the mortgage process, especially if you have an idea of what size down payment you can make. It can also provide you with peace of mind, knowing that your finances are in order and that you’re prepared to meet the costs of buying a home. How much money do you need to buy a house? Calculate how much money you will need upfront to buy a house — including a down payment, closing costs, moving expenses, etc. Calculate 3. Build your savings Buying a house is a large expense, and so it is likely that you have already built up your savings to make a down payment and pay closing costs. But, even beyond those expenses, you'll want to build up your savings so that you have some wiggle room if an emergency arises or you are met with more costs than you initially anticipated. 4. Choose a mortgage lender There are a lot of different mortgage companies to choose from, so how do you pick one? A good place to start is by comparing interest rates, fees, and down payments across lenders. Interest rates vary by loan type and term, but the average rate you will see across the industry is approximately 3 percent APR. Many lenders offer lower rates, such as AmeriSave with rates as low as 2.328 percent. The interest rate you will receive will be dependent on your credit score and current finances, so it can be helpful to pre-qualify with various lenders to compare the rates that you would get. Many mortgage lenders have an application fee, loan origination fee, third-party fees, and other government processing fees. The cost of these fees may vary by lender, and some lenders may not have certain fees, and so it is important to do your own research to see what fees your top lenders have. For a conventional loan you can generally make a down payment as low as 3 percent, but this will also depend on the lender that you choose. Sundance Brennan; American Financial Network, Inc. Industry Expert Tips for choosing a mortgage lender: There are a lot of mortgage lenders in the marketplace. When people ask me who they should be working with, it’s usually less about the rates and fees and more about service and trust. The playing field has been leveled in terms of rates and fees that are allowed to be charged and there isn’t really a wide range of costs in today’s market. You can certainly find some price differences, but in the macro sense, our borrowers are savvier than they have ever been. With information readily available on the internet, lenders have found that they need to be priced very near their competitors to find success. That should give the borrower some peace of mind knowing that reasonable prices happen when there is an open competitive market. Read reviews online, find a personal referral if at all possible, and make sure that when you speak to your loan officer you are comfortable with all of their answers and guidance. In addition to typical mortgage factors such as rates and fees, we wanted to know what mortgage consumers were most concerned about in a mortgage lender. So, we took a look at the mortgage company reviews left on BestCompany.com. From these reviews, customers most often mentioned the following in their mortgage loan experience: 65% mention customer service 38% mention speed and efficiency in the overall mortgage process 20% mention transparency 16% mention interest rates Customer service For the majority of consumers leaving reviews, customer service is one of the most important aspects of the mortgage process. In many reviews, consumers name specific loan officers that they worked with, either describing positive or negative experiences. On many mortgage company websites you can search for loan officers to try and find the best fit for you and your needs. Speed and efficiency It takes an average of 30 days to process a mortgage loan application, but in many cases, this process can take a much longer amount of time, up to 60 days. But, consumers prefer companies that can process an application quickly and efficiently. Transparency In many negative mortgage company reviews, customers detail experiences in which companies were not transparent with costs — customers were hit with much higher costs at the close of the mortgage loan process than they were given at the beginning of the process. Interest rates It is surprising that mortgage consumers are quick to mention customer service, speed and efficiency, and company transparency before interest rates. Thus, it can be inferred that customers are more concerned about the overall experience of working with a company than rates and terms. However, this is still an important factor in the mortgage loan process, and consumers do want low rates. Julie Aragon; Julie Aragon Lending Team Industry Expert Make sure you read mortgage lender reviews: We recommend finding someone who has a lot of experience in the area(s) you're eyeing for your purchase. Start with recommendations from local friends and/or family who've had good experiences with lenders in the past. No matter what, research online reviews. Read Top Mortgage Company Customer Reviews Compare top-rated mortgage companies and read reviews from real customers to find the best lender for you. Compare 5. Choose the right mortgage for you Since mortgages aren’t “one size fits all” there are a variety of loan options available, allowing consumers to tailor their mortgage to their needs and finances: Conventional loan — The most common type of mortgage loan. A conventional loan isn’t backed by a government agency and is instead backed by a private lender. Generally, this loan type will require a down payment of at least 3%. Adjustable rate mortgage (ARM) loan — With an adjustable rate mortgage loan, your interest rate will vary throughout the loan. This means that your initial interest rate will be lower than with another type of loan, but that rate will fluctuate, raising and lowering your monthly payment as you’re paying off your mortgage. FHA loan — An FHA loan is backed by the Federal Housing Administration and accepts down payments as low as 3.5% with a credit score as low as 580. This loan type can be a great option for first-time homebuyers. VA loan — VA loans are offered by private lenders and are partially backed by the U.S. Department of Veteran Affairs. This loan type offers mortgages to military service members, veterans, and select military spouses with a 0% down payment. USDA loan — Only available to eligible rural homebuyers, a USDA loan is backed by the U.S. Department of Agriculture. This loan type offers low interest rates and a 0% down payment, but you must buy a home in a designated rural or suburban area. Jumbo loan — A jumbo loan is used to finance expensive properties that exceed the limits of a conventional loan. This list is not exhaustive, and it is important to note that not all lenders offer all loan types. But, the lender you choose to work with will be key in helping you know which loan type will best fit your needs. 6. Get pre-approved for a mortgage Mortgage pre-approval is a preliminary evaluation by a lender to determine whether or not a borrower is eligible for a mortgage loan. If you are pre-approved, the lender will provide you with a letter, which will be necessary to have when you’d like to place an offer on a house. In general, it takes 1 to 3 days to receive a pre-approval letter. 7. Go house hunting When you’re ready to start the house hunting process, it will be important to find a real estate agent. While you can buy a home without using an real estate agent, it is recommended to use one to simplify and help throughout the house hunting process. "Real estate agents take a bigger responsibility with the whole process in buying a house. When you are a first-time home buyer it is best to ask for assistance from real estate agents since they will make your home hunting easier," says Ben Singh, Owner/Founder of SEEB Homes. "They will be alert for issues that might not cross your mind when buying a house and they will address it quickly. It will save you a lot of time and money since they can give you researched, current, and reputable data regarding a neighborhood's demographics, crime rates, schools, and other important factors." 8. Close on a home Once you’ve found the home of your dreams, it’s time to close — transfer the ownership of the home from the seller to you, the buyer. If you have a real estate agent, they will take care of the majority of the closing process. But, this process generally includes getting a home inspection, renegotiating the home sales prices, if necessary, completing your mortgage application, getting homeowners insurance, and then signing on the dotted line of the closing documents. Who are the top mortgage lenders? We took a look at customer reviews for the top-rated mortgage companies on BestCompany.com, and we noticed that customers most often outlined sentiments and experiences with customer service, the overall loan process, and interest rates. Keep reading for a breakdown of customer reviews for each company. AmeriSave Mortgage search Highlight: AmeriSave offers an efficient loan process and low rates AmeriSave Mortgage is one of Best Company's top picks for a mortgage lender, offering low rates and a quick and easy loan process that will get you to closing faster. AmeriSave Mortgage was founded in 2002 and has funded over $55 billion in home loans and has been trusted with over 280,000 homes. As the top-rated mortgage company on BestCompany.com, 87 percent of AmeriSave Mortgage reviews are 4 or 5 stars. From these positive reviews, we gained the following insights*: 59% of customers mentioned positive experiences with customer service. Loan officers were professional, knowledgeable, and quick to respond. 42% of customers mentioned that AmeriSave’s loan process was fast and easy. In addition, 21% of customers specifically noted how they appreciated that the AmeriSave loan process was almost entirely done online. 23% of customers mention low and competitive rates. AmeriSave Mortgage Customer Review: Joyce from Newport News, Virginia “They were very quick, efficient, and handled everything well. They knew all the answers to questions I had and they were just fantastic. They had my process finished in a month and a half. The whole experience was just fantastic.” *Data and insights are taken from a sample of 100 AmeriSave Mortgage reviews. Learn more about AmeriSave Mortgage New American Funding search Highlight: New American Funding offers outstanding customer service New American Funding is one of Best Company's top picks for a mortgage lender, offering outstanding customer service with loan officers who will help you at every step of the loan process. New American Funding was founded in 2003 and has funded over $33.6 billion in over 137,000 home loans. Ninety-nine percent of New American Funding reviews are 4 or 5 stars. From these positive reviews, we gained the following insights*: 82% of customers mention positive experiences with customer service. Customers were able to receive personalized help quickly and loan officers were reliable and knowledgeable. 35% of customers mention how fast and easy the New American Funding loan process was from application to close. 16% of customers mention low and competitive rates. Speaking to these points, and especially to providing exceptional customer service, Rick Arvielo, New American Funding cofounder and CEO, states: “New American Funding considers itself to be a family, and our clients are part of the family too. We believe in developing industry-leading technology and combining it with unparalleled customer service to create the best possible mortgage experience for our borrowers. That philosophy has led our company to become one the nation’s largest and most respected lenders.” New American Funding Customer Review: Mark from Columbus, Ohio “They frequently checked in with me during the house buying process to make sure I had everything I needed. Once I found the home I was ready to purchase, they made sure I was informed and understood each step along the way until I closed on my new home!” *Data and insights are taken from a sample of 85 New American Funding reviews. Learn more about New American Funding NBKC Bank search Highlight: NBKC Bank offers an efficient loan process and outstanding customer service NBKC Bank is one of Best Company's top picks for a mortgage lender, offering outstanding customer service with top-notch loan officers that customers frequently mention positively by name in reviews, and a quick and easy loan process that will get you to closing faster. NBKC Bank was founded in 1999 and offers a full suite of traditional banking services. The company has a top-ranked mortgage program and offers discounts to Costco members and home loan savings for all. Ninety-eight percent of NBKC Bank reviews are 4 or 5 stars. From these positive reviews, we gained the following insights*: 89% of customers outline positive experiences with customer service. The majority of reviews mention specific loan officers by name and that customers felt like they were receiving prompt and personal care. 50% of customers mention how fast and easy the NBKC Bank loan process was from application to close. 14% of customers mention low and competitive rates. In addition, customers also frequently mention low fees and closing costs. NBKC Bank Customer Review: Alexander from Alpharetta, Georgia “I am a first-time home buyer, and despite the whole process is pretty complex, I found all communication to be amazingly swift and smooth. NBKC offered us a great mortgage rate, and our agent, Ryan, managed to get to the closing even faster than we expected…” *Data and insights are taken from a sample of 100 NBKC Bank reviews. Learn more about NBKC Bank Compare Top Mortgage Companies Learn more about top-rated mortgage companies and read reviews from real customers to find the best lender for you. Compare Expert contributors: Julie Aragon, mortgage expert at Julie Aragon Lending Team. Andy Kolodgie, owner of The House Guys. Sundance Brennan, Branch VP of Training and Sales at American Financial Network, Inc. Ben Singh, owner/founder of SEEB Homes.
Read more about NBKC's home loans. Read Full ReviewVisit Site NBKC has earned the title as the best mortgage lender of 2020, standing out among 156 other home loan companies. To be ranked as one of the top mortgage lenders, a company needs to separate itself from the competition from a number of different vantage points — NBKC does just that. NBKC thrives when it comes to customer service and care, with an overall rating of 4.9/5.0 stars from hundreds of its customers. Director of Mortgage at NBKC, Chad Cronk, highlights three more unique characteristics that have contributed to NBKC's success in the eyes of its customers: "There is one point of contact throughout the entire process and an entire team behind the scenes. We leverage the latest technology to save our customers time and money. Customers receive highly competitive rates and fees." Check out the infographic below to see why NBKC has earned the Consumer's Choice Award for home loans in 2020! Take some time to explore this awesome home loan company if you are currently on the hunt to buy or refinance a house. Read more about NBKC's home loans. Read Full ReviewVisit Site
At Best Company, we believe better data leads to better decisions. We recently performed an analysis of more than 480 1-star mortgage lender reviews, and have determined common themes and complaints from customers, providing you with reliable data to navigate choosing the best mortgage lender. The most common customer complaints include the following: Poor customer serviceLack of transparencySlow process or delaysLender errorsHigh rates or feesBorrower didn't qualify Because this is an overview of general complaints, all specific company and reviewer names are removed. To better understand a specific company’s feedback, read its reviews. Poor customer service — 56% Fifty-six percent of 1-star reviews mention poor customer support. What are the common complaints about customer service? 1. Company representatives were difficult to reach. Calls and/or emails weren’t returned. Delayed response to calls and/or emails. Automated, rather than personal, responses. No response after an application was completed. No response after the applicant was denied a loan. Communication was poor between loan officers and underwriters. Communication was poor to other vendors like title companies and real estate agents. 2. Consumers didn't have a consistent contact point. Point of contact changed multiple times. Point of contact went on leave or vacation without telling the customer and failed to provide an alternate contact. 3. Company representatives weren’t on the same page. Customers continued to receive loan offers after their loan was denied. Customers were bombarded with loan offers, but communication was halted when an offer was pursued. Delays in re-verifying information over the phone. Multiple representatives within the same company asked for the same documents several times. 4. Company representatives were unhelpful. Lacked training and knowledge. Provided incorrect or vague information. Rude communication. Local support was good; corporate support was bad — difficulties in escalating issues to higher ups. How can you avoid bad customer service? Test the system. You can test out more than one lender's customer service before committing. Call or email multiple lenders with your questions and see who responds first. If you’re having a hard time getting in touch with company representatives, this could be a good indication that you won’t have good experiences with customer service later on. Some things to consider: Which companies send you a personal response rather than an automated one? Which companies are available over the weekends? Which companies are willing to work with you on a holiday? Be upfront. Define and share your communication boundaries and expectations as you shop for a lender. If you know how you’d prefer to be communicated with, don’t be afraid to look for it and ask for it. Some things to consider: How would you like to communicate? How would you like to be communicated with? How often do you want to be notified throughout the mortgage process? How quickly do you expect responses to emails, calls, or text messages? Be understanding, within reason. Though you may want to close as quickly as possible, keep in mind that your loan officer is a person too, and typically someone who is trying their best to do their job. Just like you, loan officers get sick, take vacations, and have families. Plus, they have other clients to assist. While this doesn’t excuse miscommunication or lack of communication, patience and understanding can go a long way. Provide all of your documents as quickly as possible. Often, loan officers are waiting to complete the underwriting process because the borrower has not returned documents the loan officer has requested. The faster you can provide your loan officer with the required documentation, the faster you can get to closing. You should be prepared to provide the following documents: Tax returns W-2s or pay stubs (or any other proof of income) Bank statements Proof of assets Credit history Employment verification Lack of transparency — 41% Forty-one percent of 1-star reviews mention a lack of transparency. What are the common complaints surrounding lender transparency? 1. The lender didn't follow through on a promise. A special offer was advertised but wasn’t honored. A company guarantee wasn’t backed. A lender credit amount at closing was promised, but it was decreased without notice. A waived payment option was offered, but was later denied. 2. The lender didn't adequately inform the borrower. Private mortgage insurance (PMI) was added to a loan without explanation. Closing costs changed without notice. Loan requirements weren’t explained. Exact fees weren’t communicated upfront. 3. The lender was dishonest. The agreement of sale was changed without notice. Fees were hidden or miscommunicated throughout the loan process. A prepayment penalty was hidden within the loan. A home was under appraised. A home was over appraised to approve a more costly refinance. More was charged for escrow even when taxes went down. How can you find a transparent and reliable lender? Do your research. Read the terms and conditions under any guarantees listed on a company's website. Generally, lenders reserve the right to change guarantees and promotions at any time. Ask about fees or prepayment penalties. This may not seem like a big deal up front, but you probably won’t like being hit with a fee at closing that you didn’t think you knew about before. Be transparent. You may not be able to control the transparency of your lender, but you can control the details you give them. In your loan application and moving forward, share all relevant details that may impact your eligibility for a mortgage. Many borrowers are disappointed that their lenders don't identify problematic information until it's too late to resolve the issue before the initial closing date. You can avoid such situations by disclosing student debt, tax debt, and all other financial obligations upfront. Get a second opinion. An appraiser decides how much your home is worth, and, in turn, the maximum amount the bank is willing to loan you. As the borrower, you are responsible to pay for the appraiser, but you don't have a lot of control around who does it since your mortgage broker hires the appraiser (often through a third-party appraisal management company). The bank's chosen appraiser is the authority on that particular loan. However, you can hire your own appraiser to serve as a second opinion. Slow process or delays — 18% Eighteen percent of 1-star reviews mention a slow mortgage process or delays. What are the common complaints about delays in the process? 1. Too much paperwork was required. The loan application was too long. The lender required irrelevant information. The lender required information to be notarized. The lender required information that took too much time to get. 2. Loan approval and closing took too long. The lender blamed the delay on underwriting. The process should have taken 30–45 days but took 60 days or more. The original closing date was postponed. The lender was slow to pay property taxes via escrow. The seller walked and the buyer lost the earnest money. How can you ensure that your loan closes on time? Gather paperwork ahead of time. Get a head start on your mortgage by gathering some of the information you'll need before being approved for your loan, including the following, where applicable: Tax returns Bank statements SSNs Auto loans Student loans Credit card debts Current mortgage(s) Rent payments Divorce documents Retirement accounts Recent income statements Down payment gift statement Lock your rate strategically. Many lenders offer rate lock options in case rates rise. If a rate lock appeals to you, look for a lender that doesn't charge you for this service and that has an extended rate lock period. Realtor Daniele Kurzweil asks her clients to consult with her before locking their rate. "From start to finish, the whole process of buying in NYC takes roughly 90 days. What inevitably happens is that a mortgage broker hears that we have an accepted offer and tells the buyer to lock their rate that day.” "However,” Kurzweil explains, "that doesn't take into consideration the time it takes to finalize the loan" in her local market, including the following steps: 10 days for the contract to be reviewed and the financials of the building to be verified 30 days to gather and submit paperwork 2–3 weeks for the building representative to review the paperwork Kurzweil describes the disappointment that can come when things take longer than expected: "All of a sudden, the 60-day rate lock has come and gone and my clients are stuck paying for an extension." Expect delays. Some loans will close within a month, but in many cases it can take much longer. If you keep your expectations low, you create space to be pleasantly surprised if the process goes quickly. Lender errors — 12% Twelve percent of 1-star reviews mention lender errors. What are the common complaints about lender errors? 1. Important financial details were missed. A partner's income was left out of a loan. The borrower was told that they needed more money down when they didn’t. The lender omitted to inform a borrower that a cosigner was needed. A student loan account was overlooked. 2. The lender had a typo or misclick. Monthly mortgage payments were processed more than once. A late payment was charged after a refinance. Multiple hard credit pulls were performed in one week. Bank account information was recorded incorrectly. Names were recorded incorrectly. 3. The lender incorrectly handled escrow funds. Funds were misplaced into escrow. Property taxes were assessed incorrectly. Communication with the city was executed poorly. How can you avoid errors in the loan process? Repeat yourself. Be willing to share and re-share important details relevant to your loan, even if you've already included them in your loan application, including names, birth dates, assets, and debts. Don't assume your lender will catch any discrepancies because they might not, or they might not catch it until it's too late. Audit paperwork. Where possible, look over the paperwork before it's sent to underwriting and again before closing documents are finalized. Work with your loan officer to do this face to face if there's a branch location near you, or over email, video chat, or a secure document sharing platform. Verify your taxes and insurance. To make sure your property tax payments from your mortgage servicer are going through, call the city or visit the property appraiser’s website yourself to confirm. You may also want to contact your home insurance provider, as yearly home insurance premiums are usually bundled in your escrow payments. High rates or fees — 8% Eight percent of 1-star reviews mention high rates or fees. What are the common complaints about rates and fees? 1. The lender charged too many fees. Fees and closing costs were higher than quotes from other lenders. The lender's title company charged more than others. Escrow fees were increased after acquiring the loan. A fee was charged for locking into a rate. The lender charged borrowers to submit a payment. Certain fees weren’t reimbursed when a loan didn’t close — building survey, appraisal, and home inspection fees. 2. The rates were too high. Interest rates were high despite a borrower's excellent credit. Interest rates jumped arbitrarily while market rates went down. The lender didn't offer a rate lock or guarantee. New terms required a higher interest rate. How can you secure low rates and fees? Be aware of standard fees. It's the norm for buyers to pay for some services out of pocket before obtaining a loan. You'll be responsible for some or all of the following fees, most of which are non-refundable: Appraisal Title insurance Home inspection Credit report Documentation Land survey Some fees, such as origination fees, escrow fees, and home insurance, are generally bundled within your loan amount to be paid off over time. Plan to spend anywhere from 2 to 5 percent of the purchase price of the home in closing costs. Prepare financially before you buy. To improve the interest rates for which you qualify, take steps to improve your credit. Pay off your other loans and debts where possible. Shop around. You can compare quote estimates from several mortgage lenders before initiating a hard credit pull and before committing to one. Getting multiple quotes from multiple lenders can help you explore how your mortgage terms may change based on down payment, credit score, location, and home value with online financial calculators. Borrower didn’t qualify — 5% Five percent of 1-star reviews mention instances where a borrower didn’t qualify for a mortgage loan. What are the common complaints about being denied for a loan? 1. The borrower "should have" been approved. The lender didn't accept 1099 income (self-employment or independent contractor income). A manufactured home didn’t qualify for financing. The lender advertised that borrowers with bad credit would get approved, but they were denied. 2. The borrower was given false hope. Pre-approval was offered but the borrower was denied upon applying. The borrower was approved all the way to closing, including signing and submitting final disclosure and closing costs, then denied due to an employment gap. What do you do if you're denied for a loan? Don't take it personally. If you've been turned down for a mortgage purchase, even at the last minute, it doesn't mean the lender doesn't like you. These decisions are almost all about numbers. Reapply. Your eligibility for a particular loan type can improve over time as you improve your credit and debt-to-income (DTI) ratio, among other factors. Plus, sometimes lenders change their standards or add additional mortgage products that may better fit your situation. Lenders often approve applicants with subprime credit for FHA loans. Don't let a loan rejection from one lender stop you from applying elsewhere. Focus on your credit. Credit scores are probably the single most important factor in what rates and mortgage programs a borrower will be offered, according to Terence Michael of Omni-Fund Mortgage Brokerage. "Make sure that you do not owe more than 30 percent of the total available credit on any one of your credit cards, even for a day," Michael advises. "This is one of the best hacks for either boosting your credit score or keeping it from dipping right when it’s checked by a lender or bank." If you are denied for a mortgage, taking the time to build or repair your credit can help ensure an approval next time. "Keep in mind that you cannot fix your credit overnight," explains credit industry analyst Greg Mahnken at Credit Card Insider. "It takes time to build a strong credit file and demonstrate your worthiness as a borrower. You’ll need to demonstrate that you can make payments on time, keep your utilization low, minimize your applications for new credit, and have a healthy credit mix. The age of your credit accounts is also a factor, so keep that in mind before closing any credit card accounts." Other ways to build your credit include using a credit builder loan and adding rent and utility payments to your credit reports. Your loan officer should also have resources to help you improve your credit score. Top-Rated Mortgage Lenders Compare top-rated mortgage lenders on BestCompany.com, based on customer reviews. Compare
According to a recent Bankrate survey, millennials (age 25–40) are the most likely group to experience home buyer's remorse. In fact, the data shows us that nearly 64 percent of millennials experience regret or remorse after a home purchase. What is home buyer's remorse? Home buyer's remorse is a deep regret felt after buying a house. Because homes are large purchases, if not one of the largest purchases many consumers will ever make, feelings of remorse or regret are common. While these feelings typically fade over time, you can avoid some common mistakes, which can help you feel more at ease after buying a home. What are the most common home buying regrets? According to Bankrate, the biggest finance-related regrets that millennial home buyers have include some of the following: High maintenance costs (not accounted for) (21%) High mortgage payment (13%) Displeased with mortgage rate (12%) Don’t think buying a home was a good investment (9%) Overpaid on a home (13%) Additional regrets include physical characteristics of a property, including millennials who felt they bought a house that was too big (14 percent), a house that was too small (14 percent), or a house in a bad location (15 percent). Multiple factors contribute to these common home purchase regrets, including a competitive market with record-low mortgage rates, not shopping around for a mortgage, and skyrocketing lumber prices. The competitive market provides a sense of urgency in putting an offer on a home and closing as quickly as possible, which can result in more unfavorable payments and costs, compounded with the fact that materials are just more expensive today than in the past. 13 common mistakes and how to avoid them Underestimating the commitment level involved Not shopping around for a mortgage Neglecting to consider all costs Forgetting about your emergency fund Assuming "new" means "better" Visiting your potential property only once Not taking time to see the neighborhood Buying a fixer upper you can't afford to repair Skimping on a quality home inspection Not taking one last look at the property Not getting a home warranty Making renovation decisions independently Not tracking project costs 1. Underestimating the commitment level involved A house is a big purchase, and that typically comes with increased responsibility. For example, when you get a mortgage to buy a house, you are committing to make subsequent payments on that home loan for the next 15 to 30 years, which is a large financial investment. Tip: Analyze, strategize, and counselApproach your home purchase like the large investment that it is — a house should never be an impulse purchase. Take time to establish what you want and need in a property and its location, analyze all the pros and cons of purchasing, and speak with friends, family, and real estate professionals to assess whether or not you’re ready to become a homeowner. 2. Not shopping around for a mortgage Shopping around for a mortgage is one the most important steps in the homebuying process, but a step that is frequently overlooked by the majority of home buyers. Yes, it might take you more time to pre-qualify with multiple lenders, and rates are fairly similar across the board, but saving even the smallest margin of a point in interest could save you thousands of dollars over the life of your mortgage loan. And you won’t know what rates are available to you if you don’t shop around and pre-qualify with multiple lenders. Tip: Read customer reviewsRates and fees will be entirely dependent on your personal finances, including your credit score and debt-to-income ratio (DTI). But if you want an idea of what the rates and fees are like with a specific mortgage lender, reading customer reviews can be a game-changer. Since mortgage products and services and fairly similar among lenders, it’s important to get an idea of whether or not a company is trustworthy and if they provide reliable customer service — a mortgage is a large investment, so you wouldn’t want to be locked in with a lender that you can’t get a hold of or that can’t answer any of your questions. Read Mortgage Company Reviews [From Real Customers] Compare rates and fees, and see what customers have to say about the mortgage process experience with specific companies. Read Reviews 3. Neglecting to consider all costs There are a lot of homebuying costs to consider, and that’s just a fact. The down payment is the big one that’s usually on the top of mind, but don’t forget about closing costs, moving expenses, home furnishings, and home maintenance costs that will inevitably come up. Crunch some numbers before you get too far in the homebuying process, or to simply map out the costs that might arise. Tip: Don’t just focus on the down paymentLuke Babich, CSO/Co-founder of Clever, recommends the following: “I'd recommend anyone considering buying a house to make a balanced analysis of whether or not they can actually afford to buy a house. There's a common saying that just because you can afford the down payment does not mean you can afford the mortgage! Make sure you factor in important variables: house maintenance (which is on average $13,000 a year), mortgage payments, home insurance, and security.” 4. Forgetting about your emergency fund The homebuying process includes many large upfront costs, not to mention that you will need to budget out your monthly mortgage payments throughout the life of your loan. Thus, it can be tempting to save up all money necessary to cover your home purchasing costs, but if you neglect to save up some money for emergencies, you may find yourself in deep water later on. Therefore, when you’re saving up to buy your dream home, also save up for your emergency fund. Tip: Buy less house than you can affordJohn Grimes, Realtor at BHGRE Metro Brokers, recommends the following: “It is very important that they draw the line at a level they're comfortable with going forward with no rosy assumptions of increased income. Ideally, a dual income couple should buy a house that either one of them can swing on their one income. That almost never happens, but it would reduce stress in the household. Buying below one's means leaves room for savings, vacations, entertainment, charitable giving, and other priorities.” 5. Assuming “new” means “better” Daniele Kurzweil, the Friedman Team at Compass, explains how a new home doesn’t necessarily mean it’s “better”: “Everyone loves walking into a home and seeing that there is no work to be done. Bring your toothbrush and you are home. Many developers and home flippers are catering to people who want new new new and design their projects to conform to whatever the latest trends are. Our clients walked into an apartment and fell in love with the open concept look with very modern finishes. Fast forward six months and our clients realized that while an open concept floor plan might be wonderful for a two-story house, in an apartment it poses its own unique challenges. Sound travels, and when you have one big open room you have nowhere to escape to. The modern finishes were beginning to look dated, and since everything was out in the open, it was the only thing they could focus on.” Tip: Consider the pros and cons of a new buy or build Kurzweil continues: “Design trends are just that — trends. When purchasing a home, be sure to consider what your needs are. Is this for starting a family? Empty nesters? First-time home purchase? Think of buying a new construction home kind of like buying a car: the second you drive it off the lot, it starts depreciating in value. You are buying new construction because it has never been lived in, and as such you are paying a premium. But when you go to sell, one of the biggest draws will no longer be there. . .it will no longer be new.” 6. Visiting your potential property only once Imagine that you find a property that you can just feel is the right one. The neighborhood is beautiful and quiet. The neighbors seem nice. You’re ready to put down an offer right there and move in the next day. While this can happen and your gut feelings shouldn’t necessarily be ignored, you might want to visit the property again on another day. When you only visit a property once, you might miss out on important factors, such as after school traffic, that might not actually be ideal. Additionally, a one-time visit might not provide you with enough time to take a close look at the property, which could cost you in the future if there were repairs or issues that you missed on your one and only visit to the property. Tip: See the property at different times on different daysGerard Splendore, Broker at Warburg Realty, recommends the following: “I sold a one-bedroom apartment to a first-time buyer and we only viewed it when school was in session, not at the beginning of the day for drop off or end of day for pick up. At the walk through the day before closing the street in front of the building was clogged with school buses and parents in cars. This came as a complete surprise to the buyers.I always suggest seeing properties during the week at various times, in the evening, and on weekends. This is a great way to avoid any surprises about the surrounding area.” 7. Not taking time to see the neighborhood Alison Bernstein, founder and CEO of Suburban Jungle, was the first of her friends and colleagues to leave the big city to live in the suburbs. She and her growing family found an area that seemed perfect on paper, but it turned out, after they moved, that the area wasn’t what they had anticipated at all and they realized that they really wanted something different. The trouble is that real estate agents don’t always know neighborhood and community nuances, so it can be hard to get a complete picture of an area. For this reason, Bernstein started The Suburban Jungle, a company committed to helping families make the move to suburbia by making connections in the communities they’re interested in. Tip: Meet people and make connections Bernstein recommends the following: “Talk to as many people that live [in the neighborhood] and try to get the real, non-sale pitch to understand what their day is like. Maybe meet them and run a few errands with them and see if you can see yourself there. You know, like even going to the school pick-up if you have kids, or going to some preschools and being there at the time of drop-off or pick-up. Those things go a long way because a lot of people see community on a Saturday and they're like, "oh, this looks fabulous," but it tells a different story on like a Tuesday afternoon.” 8. Buying a fixer upper you can’t afford to repair Perhaps you’ve spent some time watching HGTV and have been entranced by shows like Fixer Upper or Good Bones. Maybe you think that buying a run-down home could be a fun and easy project. This could be true if you have a background in construction or home renovation, but for the average individual, buying a fixer upper home could cause more headaches and stress than you really want or need. Tip: Don’t get in over your headAlison Bernstein from Suburban Jungle explains: “If you have the appetite for fixing up and you don't get in over your head, and that's what you're excited about, then great. It's important to make sure that people have enough time because a lot of people are working full-time or have kids, and it is definitely a very time-consuming process. So as long as you can enjoy it and take it on, and like I said, more importantly, enjoy the process, then it's great. If you don't have a choice, you're stuck and you're renovating because you have to, I think it takes on a different light, but hopefully it's well worth it.” 9. Skimping on a quality home inspection One of the best ways to induce remorse or regret is by skimping on a home inspection. In many cases, this might be a required part of your mortgage process. But if it isn’t, that doesn’t necessarily mean that it should be optional. Tip: Pay more for a highly qualified inspectorWally Conway, president of HomePro Inspections, recommends the following: “The single best way to avoid buyer’s remorse is to have clarity on what you are buying and have protection for the unexpected. Your home inspection should be performed by the most experienced and technically competent home inspector that money can buy. Most buyers are taking on a 30-year mortgage, and that’s a long time to live in regret. It's also 360 mortgage payments! Wouldn't it seem wise to invest a mortgage payment to ensure that you have done as complete a job in due diligence as is humanly possible? Consider protecting your home after the inspection is done by choosing a home inspection that includes protection to cover the cost of the unexpected problems that will come up with home ownership, such as live sewer line failures, mold, and roof leaks.” 10. Not taking one last look at the property David Pipp, Personal Finance Blogger at Living Low Key, shares his experience not noticing an issue that could have been avoided: “Shortly after we moved into the house, we had a massive rain storm and ended up with water in our basement. It wasn't until that issue arose that we noticed there were no gutters on the back side of the house where water got in. $2,000 later we had new gutters on the house and our water problem was fixed. Since we moved in, we have had to add a water filtration system to the well, replaced both of the decks on the house, replaced a leaking toilet, and countless other small fixes totaling close to an additional $10,000. Next summer we plan to have the house re-insulated because it gets really cold during the Minnesota winters.” Hire a second home inspector One way you can ensure that nothing is missed, or any issues are overlooked, is by hiring a second home inspector. This might be an additional upfront cost, but having a second opinion at the start, and a comparison to your initial home inspection, could save you thousands of dollars later on. 11. Not getting a home warranty After putting money into a mortgage, a home inspection, and more, you may want to shrug off getting a home warranty — after all, it would just be one more expense, right? However, you never know what could happen once you close on your home. Perhaps, just days after closing, your water heater breaks or your air conditioning stops working. Without a home warranty, you could be spending a large amount of money out of pocket, whereas a home warranty could save you from some of these expenses in the long run. Tip: Understand how a home warranty worksJlyne Hanbak, REALTOR® Keller Williams Realty, explains: “A home warranty is a relatively inexpensive way to protect the major appliances and systems of a home for a specific period of time after the home is purchased. A home warranty can — and should — be negotiated into the contract on behalf of the buyer so that they are protected after their home closes.” 12. Making renovation decisions independently When renovation decisions come up, it can be helpful and important to have a second, professional opinion on your next steps. While you might think that you could save more money by doing a Google search or seeing what other people have done on YouTube, these options may not be the best for your specific situation and could cost you more overall. Tip: Hire a professional When buying a fixer-upper home you need to get advice from a home improvement professional on its overall potential for making the improvements you're expecting to make. 13. Not tracking project costs John Bodrozic, co-founder of HomeZada, explains: “When you don’t budget and track costs on home remodel projects, you can end up way over budget. Plus, you don’t have a record of costs that can help you adjust the tax basis of your home at tax time.” Tip: Budget and record expenses from day one Keep a record of your home expenses from the very beginning, it’s really as simple as that. Move forward without regret The answer to avoiding home buyer’s remorse really comes down to three things: financial preparation, education, and awareness. Learn about the different mortgage products available to you. Get loan offers with interest rates from multiple lenders. And before settling on a particular lender, read customer reviews about the top-ranked mortgage lenders. Are there hidden lender fees? Are the loan officers prompt to return calls and emails? Are other borrowers pleased with their experience? Remember that a professional opinion could be a big money and time-saver. While it may seem like a hassle to get a contractor, home inspector, or other home professional to take a look at your property, it could save you from stress later on. Buying a home, unfortunately, can often come with some buyer’s remorse — it is a large purchase after all. But if you prepare properly and learn from the mistakes of others, you can make the best decision possible without looking back. Compare Top-Rated Mortgage Lenders Read verified customer reviews and find the best mortgage lender for your needs. Compare Article updated by Kalicia Bateman Contributors: Luke Babich, CSO/Co-founder of CleverJohn Grimes, Realtor at BHGRE Metro BrokersDaniele Kurzweil, the Friedman Team at CompassGerard Splendore, Broker at Warburg RealtyAlison Bernstein, founder and CEO of Suburban JungleWally Conway, president of HomePro InspectionsDavid Pipp, Personal Finance Blogger at Living Low KeyJlyne Hanbak, REALTOR® Keller Williams RealtyJohn Bodrozic, co-founder of HomeZada