Homebuyers

Insider Tips and Tricks: Mortgage Lenders Reveal Secrets to a Smooth Homebuying Experience

Buying a home may initially feel overwhelming. You have to find the right property, have your offer accepted, and then find the mortgage loan that’s right for you.

However, with the right preparation, you can streamline the process and save time, money—and save yourself plenty of stress.

We have compiled six essential tips from seasoned mortgage loan officers to help you navigate the complexities of getting a home loan, whether you’re buying your first home or your fifth.

1. Get preapproved for a mortgage

One of the biggest mistakes homebuyers make is visiting open houses before getting a mortgage preapproval letter. Skipping this step can lead to disappointment if you fall in love with a property and then learn you won’t be approved for a large enough loan to afford it.

Getting preapproved involves a lender reviewing your financial situation and determining how much money they will lend you to purchase a home.

This is critical in helping you to understand your budget. It also makes you a more attractive buyer to sellers, who now know you are likely to get approved for the amount you are offering for their home.

"The sooner you start the process, the sooner we can help with any obstacles or challenges so that when you find your home, we are ready, and the process closes smoothly," said New American Funding loan officer Leslie Bergen. She is based in El Paso, Texas.

2. Learn about different types of mortgages

Understanding the types of mortgages available in the market and what they offer can help buyers achieve homeownership.

U.S. Department of Veterans Affairs (VA) and U.S. Department of Agriculture (USDA) loans typically allow qualifying borrowers to purchase homes with no money down.

That can make them attractive to veterans seeking VA loans and those seeking homes in more rural areas using USDA loans.

Federal Housing Administration (FHA) loans require a down payment, but it can be as low as 3.5%. This may appeal to first-time buyers with limited savings.

Generally, VA and FHA loans offer buyers lower mortgage rates. However, USDA and FHA loans often require private mortgage insurance (PMI), which can make monthly housing payments more expensive.

"I wish homeowners knew that working with the right mortgage partner will help them be educated on the loan process and programs, guide them to the next steps, and help them build wealth with real estate," said Bergen.

3. Seek down payment assistance

Many buyers are unaware of the numerous down payment assistance programs available. This could significantly reduce their initial financial burden if they are eligible for the assistance.

New American Funding’s Pathway to Homeownership program offers up to $8,000 in assistance to qualified borrowers in select areas. These funds are available to first-time homebuyers and do not need to be repaid.

Additionally, other down payment assistance programs are available that can vary by location, profession, race, employment, and more. You may not need to be a first-time homebuyer to be eligible.

“There are many down payment assistance programs available," says Katy Rosenlund, a New American Funding loan officer assistant in Kirkland, Washington.

4. Boost your credit score and lower your debt

Maintaining a good credit score and having less debt is important to secure the best mortgage terms.

Lenders generally view borrowers with higher credit scores as less likely to default on their loans. That’s why these borrowers can often secure lower mortgage rates and fees on their loans.

Those with less debt may be able to qualify for larger loans. That is because lenders look at a buyer’s debt-to-income ratio, which means how much monthly income you earn compared to your monthly debts.

If your monthly income isn’t eaten up by paying off credit cards or making car payments, then you may have more money that can go toward a larger mortgage payment. 

Homebuyers should keep their credit usage low, and avoid making large purchases or opening new credit accounts before applying for a mortgage. Pay down as much debt as you can. And make sure that your credit report is error-free.

Another tip from mortgage lenders is to keep your money in the same account and avoid opening and closing accounts. This can make it easier for your loan to be approved.

5. Be careful co-signing loans for family and friends

Borrowers should keep in mind that co-signing for others can affect their ability to get a mortgage.

Mortgage advisor Cinthia Pedraza cautions that co-signing loans for friends or family can impact your mortgage eligibility.

“A piece of advice that I share with my clients is to remember that co-signing a loan for family or friends will count towards your debt-to-income ratio,” said Pedraza. She is based in Tustin, CA. “Limit the number of loans you co-sign, as their late payment will affect your credit. I always say, their late payment is your late payment."

6. Consider buying now and refinancing your mortgage later

Waiting for rates to drop can result in missed opportunities. If you can afford to buy a house now, you can build equity.

If you make timely monthly mortgage payments, you may also be able to improve your credit score. This can help you to potentially qualify for better refinancing options later when mortgage rates fall.

Refinancing means replacing your current mortgage with a new one, usually with better terms. This could mean getting a lower interest rate, extending the loan term, or changing from an adjustable rate to a fixed-rate mortgage.

Refinancing comes with some costs, such as closing and appraisal fees. However, these costs can often be rolled into the new loan or negotiated with the lender. It's always a good idea to weigh the potential savings against the costs to determine if refinancing is a good option for you.

“If you love the house and can afford the mortgage, buy the home," said New American Funding loan officer Dianne Steffey, who is based in Dallas, Texas. “You can refinance later when rates come down. And it will. History shows that.”

^{Leslie Bergen NMLS # 383352}

^{Cinthia Pedraza NMLS # 1854523}

^{Dianne Steffey NMLS # 267658}