Topics:Homeowner Tips Downpayment Home Improvement First-Time Homebuying Working With An Agent Successful Selling House Hacking Best Mortgage Rates Companies real estate investing Closing Costs Home Loan Research
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. First-Time Homebuyer Guide A complete guide for first-time homebuyers including key terms, the step-by-step process of buying a house, and helpful FAQs. Download 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
If you gravitate towards reading negative reviews in your research, or even just for fun, you can thank your brain's automatic negative bias. And our brains have the right idea because poor reviews serve us in practical ways. For consumers, they can warn against potential problems. For companies, they can indicate areas for improvement. The goal for borrowers: choose the best mortgage lender At Best Company, we believe data-informed decisions are better decisions. We recently performed a content analysis of all of the 175 1-star reviews in our Mortgage Rates category as of Fall 2019. Here we present our key data and insights on the most common mortgage lender complaints, including how to leverage this information to get — or provide, if you're a lender — the best mortgage purchasing experience possible. Within each theme, we describe specific issues in detail, what lenders can do to improve, and what consumers can do to avoid those particular problems when they're mortgage shopping. Because when something goes wrong with your mortgage, sometimes it's the company's fault. But sometimes it isn't, since buying a home comes with inherent risks. The opportunity for lenders: respond to reviews and use them to improve Even good lenders get the occasional bad review. Sometimes lenders drop the ball. Sometimes borrowers have unreasonable expectations. And sometimes reviews are highly emotional. Regardless of why negative reviews were written, consumers and companies stand to benefit from being aware of them. Prospective borrowers can watch out for common issues and avoid truly dishonest or otherwise problematic lenders, and companies can respond to reviews and improve their practices accordingly. Along with providing consumers the information they need to make sound decisions, we offer tools for companies to improve customer engagement. *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 their reviews. Poor customer support — 54% What are the common complaints about customer service? 1. Company representatives were difficult to reach. They never returned calls or emails. They took a long time to return calls or emails. They sent automated, rather than personal, responses. They didn't respond after an application was completed. They didn't respond 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. Their contact person changed several times. Their contact person went on leave or vacation without telling them and failed to provide an alternate contact. Multiple divisions of a company contacted the consumer, asking for information already given to someone else. 3. Company representatives weren’t on the same page. They kept calling the consumer with loan offers after denying them a loan. They bombarded consumers with loan offers, then halted communication when an offer was pursued. They took too long to re-verify information over the phone. They sent frequent emails requesting information instead of sharing all needed details upfront. Multiple representatives within the same company asked for the same documents several times 4. Company representatives were unhelpful. They lacked training. They provided incorrect or vague information. They spoke rudely. They didn't convey genuine caring. Local support was good; corporate support was bad. What lenders can do Ask what the client prefers. "Put yourself in the client's shoes and communicate the way they communicate with you," suggests Meghan Handy, customer experience director and vice president at Embrace Home Loans. "For example, 'If something comes up, do I call you at work? Do you like to text?'" Sarah Alvarez, loan officer at Family First Funding, explains, "Many people don't have time during the workweek to think about their mortgage, so often the best time to chat is over the weekend." Prioritize communication. Develop a company standard where you commit to return emails or phone calls within a certain amount of time, such as 48 hours. In situations that require more immediate replies, such as the days after submitting an offer or the days leading up to closing, narrow the time gap even more. Respond to every applicant. Don't ditch a consumer just because their application was denied. Walk them through potential ways to improve their likelihood of being approved for a loan in the future. Share bad news right away. Regularly communicate the status of the loan, even and especially if you've hit a roadblock. "A simple weekly check-in can go a long way to ensure the client feels like they are in the loop," advises Realtor David Stroh, GRI, with RE/MAX Plus. Melissa Okabe, real estate agent with Alta Properties, says she recently had an experience where a direct bank lender stopped communicating with her and her client as they were nearing the final contingency removal period. "My client later found out, through a letter in the mail, that the bank denied the loan. It was extremely disappointing that this lender almost cost my client her house by lack of communication." What borrowers can do 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. Who will send you a personal response rather than an automated one? Who is available over the weekends? Who is willing to work with you on a holiday? Be upfront. Define and share your boundaries and expectations as you shop for a lender. How would you like to communicate? How often do you want to be notified throughout the process? How quickly do you expect responses to emails, calls, or text messages? Be understanding, within reason. Though there is definitely a need for urgency when you're pursuing a mortgage loan, the workers behind the company are people too. Just like you, loan officers get sick, take vacations, and have families. Plus, they have other clients to assist. Provide all of your documents as quickly as possible. Oftentimes, 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 your clear to close. Lack of transparency — 34% What are the common complaints surrounding the lack of transparency? 1. The lender didn't follow through on a promise. They advertised a special offer and didn't honor it. They offered a company guarantee and didn't back it. They promised a lender credit amount at closing, then decreased it. They offered to waive a payment, then didn't waive it. 2. The lender didn't adequately inform the borrower. They put private mortgage insurance (PMI) on a loan without explanation. They incorrectly explained the recast process. They changed the closing costs. They didn't explain requirements. They didn't explain fees. 3. The lender was dishonest. They changed agreement of sale without speaking to the buyer. They hid fees within the loan. They hid a prepayment penalty within the loan. They under appraised a home. They over appraised a home to approve a more costly refinance. They charged more for escrow even when taxes go down. They claimed to suddenly encounter a roadblock. What lenders can do Be cautious about what you promise. As with most situations, it's better to underpromise and overdeliver. Alvarez says, "I have heard about lots of people being strung along for months being promised one thing only to be told at the end that it is not actually possible. How frustrating for the client!" And ultimately, the situation is frustrating for the lender, too, when the loan doesn't close. Don't shy away from hard questions. Share all details about what is expected of the buyer in regards to the down payment, appraisal, earnest money, closing costs, PMI, prepayment penalties, and escrow payments. Ask about — and confirm — all relevant financial factors, especially student loan debt, which is often overlooked until the last minute. Share bad news right away. Matthew Yu, vice president of Socotra Capital explains that when scenarios don't go well, it's a natural human reaction to not want to disappoint clients by giving them the bad news. However, he explains, "That's a big mistake. Being upfront with the client about their loan situation will not only allow you to problem-solve but also to build credibility with your clients." Anticipate roadblocks. Before issues even come up, discuss potential roadblocks with your client. Brian Koss, executive vice president of Mortgage Network, advises lenders to "help borrowers understand how the process works and set realistic expectations." That way, he explains, "If there are bumps along the road, they don't come as a shock to the borrower. Ask direct, even probing questions and listen closely to determine a borrower’s true needs and fears, which they may not disclose without being asked." Create a F.A.Q. Borrowers will oftentimes have the same questions. To help streamline your operations, create a user-friendly frequently asked questions document or page on your website to guide your wayward borrower. What borrowers can do 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 your lender specifically about prepayment options within your loan. Be transparent yourself. 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 afterward, 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. Lender errors — 34% What are the common complaints about lender errors? 1. Important financial details were missed. They didn't add a partner's income to a loan. They didn't tell the borrower that they needed more money down. They didn't realize you needed a co-signer. They didn't catch a student loan account until late. 2. The lender had a typo or misclick. They processed monthly mortgage payments twice. They charged for a late payment after a refinance. They did four hard credit pulls in one week. They incorrectly recorded bank account information. They didn't get names down correctly. 3. The lender incorrectly handled escrow funds. They misplaced funds into escrow. They incorrectly assessed property taxes. They communicated poorly with the city. What lenders can do Admit error. Mistakes are inevitable. No matter how good a company is, it's run by humans. Alvarez explains of her company, Family First Funding, "If a mistake has been made on our end, we always admit it right away and may try to correct it by waiving an appraisal or application fee or whatever makes the most sense as a remedy." Respond from the top. Holly Andrews, managing director of KIS Finance says, "An effective way to resolve issues with unsatisfied clients is by having someone high up in the company, like the CEO, talk to the client directly. When the client realizes that their concerns have been passed to the top without them asking for it, they will feel that they are a top priority." What borrowers can do 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. Slow process or delays — 24% 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. 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. What lenders can do Explain the process in detail. Most complaints are the result of unfulfilled expectations. So it's key to set realistic ones. "A good mortgage lender will explain the entire process on the front end so that clients will know what to expect," explains Corey Fager, a Realtor with Nashville Homes. He continues, "I appreciate when lenders share some possible road bumps and how they will handle them. "For example, I've had many clients who have shared their frustration halfway through the loan process because they're being asked to provide more and more paperwork. Had that lender framed the process and given the buyers an expectation that they may have to send additional paperwork through the process, it wouldn't be a big deal to them." Create a documentation reference sheet. Consider creating an all-inclusive list of everything you may need from the borrower prior to closing. When lenders ask for documentation from clients multiple times and fail to communicate why, that leaves clients in the dark, according to operations manager Matt Hackett of Equity Now. Anticipate and share needs before they arise. Set up a tentative timeline. Even though there are so many variables that can determine how quickly a loan closes, map out what borrowers generally experience — without making promises. Hackett recommends that lenders "set expectations from the beginning of the process with accurate timelines and the steps needed to move the loan from application to closing." He says it's important to ensure that clients know that the process can be protracted depending on the loan type, purpose, and complexity. What borrowers can do 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 buyers the option to lock into an interest rate 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 such as Quicken Loans, which locks your qualifying interest rate for 90 days. 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 unfortunately, it can take much longer. If you keep your expectations low, you create space to be pleasantly surprised if the process goes quickly. High rates or fees — 20% What are the common complaints about rates and fees? 1. The lender charged too many fees. The fees and closing costs were higher than quotes from other lenders. The lender's title company charged more than others. The lender upped escrow fees after acquiring the loan. The lender charged a fee for locking into a rate. The lender charged borrowers to submit a payment. The lender didn't refund fees such as a building survey, appraisal, and home inspection when loan didn't close. 2. The rates were too high. Interest rates were high despite borrower's excellent credit. The rate jumped arbitrarily while market rates went down. The lender didn't offer a rate lock or guarantee. New terms required a higher interest rate. What lenders can do Explain the details of a mortgage quote. "Lenders can often be too aggressive or too optimistic in their quotes — that is, they quote terms based on an exceptional client," explains Ashley Baskin, advisory board member for Home Life Digest. She continues, "But many people seeking loans have issues with their credit, income, or other factors, and therefore the interest rate is higher than anticipated or the terms are a bit different." Baskin's proposed solution echoes a common theme among all complaint categories: "Don't oversell what you can really provide." Explain fees upfront. Make sure borrowers know what fees they will be responsible to pay, such as a home survey where applicable, home inspection, appraisal, rate lock where applicable, earnest money, origination fees, and closing costs. Explain the terms behind each of these fees, including which ones are nonrefundable. What borrowers can do 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 two to five percent of the purchase price of the home in closing costs. Prepare financially before you buy. To improve the interest rates to 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. You can also explore how your mortgage terms can change based on down payment, credit score, location, and home value with online financial calculators. NBKC Bank has 17 financial calculators for mortgage shoppers to use for free. Borrower didn’t qualify — 13% 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). The lender wouldn't finance a manufactured home. The lender advertised that borrowers with bad credit would get approved, but still declined. 2. The borrower was given false hope. They were preapproved, then denied. They were approved all the way to closing, including signing and submitting final disclosure and closing costs, then denied due to an employment gap. They were charged fees, then denied. What lenders can do Explain why. "Outside of being told that their application for a mortgage was denied, what upsets clients the most is a lack of clear communication or reasoning behind it," explains Patrick Frank of Biproxi. Frank advises lenders to communicate thoroughly with prospective borrowers so they know how to improve their future mortgage eligibility. "If a client gets denied for one reason or another, there’s a chance they could come back to you once they correct their financial situation." Take local markets into account. Pay close attention to the local market of your clients, especially if you're an online lender. New York City-based real estate professional Daniele Kurzweil says that she often works with clients who have prequalification letters from their mortgage brokers approving them to buy apartments at a certain amount. "What they don't realize is that the requirements for the bank and the requirements for the buildings are vastly different. Their mortgage broker might be someone based out of Texas, whereas they are looking to buy in New York City." In this situation, Kurzweil explains, "All bets are off. They have to go back to the drawing board, and we start the process over from scratch." What borrowers can do 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. In fact, nobody wins when a loan doesn't close, so your lender is most likely disappointed, too. Reapply. Your eligibility for a particular loan type can improve over time as you improve your credit and other financial 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 keep 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." Be consistent and patient. "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. Harsh late payment penalties — 10% What are the common complaints about harsh penalties? 1. Lenders were inflexible or unreasonable when borrowers struggled financially. They wouldn't honor the plans arranged with a borrower's previous lender. They took funds without authorization. They foreclosed on the borrower's home. They wouldn't work with the borrower to adjust the loan during a slow time in employment. They sued the borrower for a late payment. They wouldn't approve an equity loan after a home disaster. What lenders can do Assume the client knows nothing. If you think you've over-explained some aspect of the loan terms, chances are, you haven't. Especially with first-time homebuyers, offer to go over the fine print with borrowers multiple times. Many consumers fail to ask questions because they worry about looking dumb. Explain exactly how to set up mortgage payments, what to do if the borrower struggles to pay, and what the consequences are for missing a payment. Be flexible when possible. Work to understand the borrower's situation if they can't make a payment one month. What is going on with their job? Their family? Is it temporary? Within reason, explore ways to cut the borrower some slack through a repayment plan or a loan modification. Would a refinance help the situation? Can PMI be dropped? Can escrow payments be rearranged? Craft a kind message delivery. If a penalty is necessary, remember that a human being is on the other side of the phone, mailbox, or computer screen. It's an ugly task to break bad news, but an understanding tone can soften the blow. Be willing to answer questions the borrower has about the situation, and don’t hide below the legal jargon. What borrowers can do Know the terms before you commit! Closing day is not the time to start familiarizing yourself with the terms of your loan. Ask questions about payment due dates, penalties, and other loan servicing details prior to signing the paperwork. Have your lender show you where everything is in writing. In some states, you’re given several days prior to closing to review this information. Alert your lender ASAP. Don't wait to communicate until you miss a payment. When you miss a payment, the lender reports the missed or late payment, called a delinquency, to the credit bureaus, which will negatively affect your credit score. If you anticipate struggling to make a payment, contact your lender right away to see if there are any options to keep you in your home and salvage your credit. Potential solutions for a late payment or multiple late payment balance include the following: Refinance Forbearance Loan modification Debt settlement Repayment plans If staying in your home is not possible, your lender and your real estate agent will work with you to choose one of the following options: Renting your home Selling your home Short sale Deed in Lieu of Foreclosure Track your loan servicer. Mortgage lenders will often buy loans only to sell them off to another company after closing or at any point throughout the term of the loan. If you make special arrangements with a particular lender, those may not be honored by the next loan servicer.
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