7 Steps To Getting A Good Mortgage Deal

Instinctively, you will want to get the best mortgage available in the market rather than just a good one. But realistically, most people do not even get a whiff of what the best deal is as they do not qualify. It would surprise many people to suggest that the best package in the market can be as discounted as half of what you are quoted. And surely you must have the tacit knowledge that these low blow rates are mean for clientele that meet specific profiles. For example, a mega-millionaire buying a $25m house or a senior director in a bank.

However, it is within your power to secure the best deals available. If you diligently follow these 7 steps, you will have the best chance to reach that very objective.

Step 1 – Fix your credit

Even in the modern economy today, a lot of people still feel that it is a little shady to fix their credit. Usually those are the ones who are confused with the definition of “fix” with “fake” or “manipulate”. Let’s put it this way. If lenders have the freedom to systematically draw up borrowing profiles of individuals using quantitative data, we have the right to manage the data about us that gets put through the system. There is absolutely nothing wrong with that.

Without going in depth into credit scoring, you basically have to remember 3 things to keep yourself in the “nice” list filed with the credit bureaus.

10 Make full payments on your credit card bills and other loan instalments

20 Don’t be late on your payments

3) Never sign up as a third party borrower or guarantor for someone else’s loan

Step 2 – Understand the types of waivers and subsidies the lender can grant you

As a mortgage is a product that a lender has the potential to make a lot of money from, they are usually willing to grant you concessions and freebies at the start. Once you are locked into a contract, it will be much more difficult to ask for flexibility. In view of this, the point in a borrower-lender relationship where you have the most negotiating leverage is in the stage of acquisition. Take full advantage of this while you are on top and ask for all types of freebies including full subsidies for appraisal fees, legal fees, administrative fee waivers, free fire insurance, etc.

Step 3 – Shop around with different lenders

The number 1 reason why property buyers do not end up with the best mortgages is that they do not know that better deals are available elsewhere. This is also partly due to the sources that refer them to the lenders in the first place.

You shop around when buying air tickets, you shop around when buying a smart phone, and you shop around when buying notebook computers. So it is truly amazing that not enough people shop around for mortgages worth hundreds of thousands of dollars. Because most people do not buy real estate very often, they enter a “rookie” mode when going through the process of closing. And this inevitably leads them to trust the people who are supposedly working in their best interest. And when those people are not up-to-date with the latest mortgage rates, it is the property buyer that suffers eventually – without even knowing it.

So remember to go shopping. You don’t have to apply with every bank. But do remember to check out the offerings from all of them. At the very least, get at least 3 different quotes from 3 different lenders to make a more informed decision.

Step 4 – Contact a mortgage broker

You might want to work with a mortgage broker or you might not. Even if you decide to go direct to a bank, nobody can stop you from calling up the local broker to enquire about what is available in the market. This is to make your investigative work much easier. Brokers have access to a whole network of information and most of them are able to give you good rates because they deal with money on a wholesale basis. But beware of the possibility that they could push for the type of deals that give them the best commissions.

Step 5 – Get pre-approval

I can’t grasp the thought that many home buyers do not get an approval in principle loan before they go shopping for a house. Would you walk into a luxury boutique to buy expensive handbags when you do not know you credit card limits? A mortgage is something you have to get approved for after credit analysis. It is not an entitlement.

Be aware of the difference between pre-qualification and pre-approval. The latter is the one that is more concrete, even though a lender can still back out of it under certain circumstances. If you feel that you could be biting off more than you could chew in seeking a house, it is best to get a pre-approval before going ahead with any purchase. You will be saving yourself from undue stress this way.

Step 6 – Negotiate terms

If you still think that the only available terms and rates are those that are being advertised in the newspapers, on radio, and on the internet, it’s about time you wake up. Every item in a mortgage contract is negotiable. If a banker insists that there are no legal subsidies available, tell them in the face that you are aware that there are and walk over to another bank. When a banker insists that their rates are non-negotiable, roll your eyes at them.

Interest rates are always negotiable. If you meet a certain borrower profile, lenders could be more open in sharing their unpublished rates with you. But if you tick off the loan officers in some way, they might be more reserved about showing you what they have in their treasure chests. Even if you are in a situation where a banker is unlikely to budge, it still does not hurt to ask for better terms. You might just get lucky.

Step 7 – Look out for closing costs

Closing costs can run up into thousands of dollars. Your banker should be able to give you a good estimate as early as at the point of application. The best scenario is that you can get most of them waived. And if you can’t, at least you will be able to prepare the cash beforehand for a smooth closing.

And it is best to have between 3 to 6 months worth of mortgage payments tucked nicely in your account once the mortgage is effective. Because a property transaction can take a huge toll on anyone’s cash flow, it is best to be prepared for the worst until everything starts to stabilize.

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