How To Shop For a Mortgage? | What Lenders Don't Want You To Know

The number one person we work with alongside our buyer clients is their lender. As experienced real estate agents in Katy, TX we have learned what makes a good experience and how our clients can get the best pricing on their loan. 

When we make an offer on a house we will be asked by the listing agent to present your proof of funds. If you are making a cash offer we would use your bank statement. If you are using a loan with your offer you are much better off having a preapproval letter vs. a prequalification letter. A preapproval letter tells the seller that the bank knows you and has verified your ID along with supporting documentation to ensure that you are financially in place to meet their requirements in lending you a specific dollar ammount to buy a house. If you put yourself in the shoes of a seller and you received an offer that the bank had verified (preapproved) vs not verified (prequalified), which would you choose?

Does Shopping Multiple Lenders Hurt My Credit Score?

Yes and No... It's not so straight forward. Yes, if you shop multiple lenders for a mortgage it will lower your credit score because it appears as though you might be looking for multiple houses or loans. The only exception to that rule is that in the first two weeks of your credit check you can shop with a few other lenders as well and their credit check will not negatively impact your credit score. This is good news as it allows the lenders the opportunity to get you the best terms to your loan. 

How to Shop For A Mortgage Lender?

Most all of my clients are aware of how an interest rate as important to shop. The thing that is most regularly missed is to also look at the cost of originating that loan. There can be a number of fees or points a lender charges for a loan and factoring these into your decision can get complicated. Fortunately lenders are required to tell you what the APR is of the loan you are applying for and the APR is a percentage that factors in the up front costs of a loan. Let's say you have a loan of $100,000 at an 8% interest rate. That loan also has 2 points which is equal to $2,000. The APR for that loan would be 8.16%. If the loan had a 5 point fee then the APR would be 8.53%.  Comparing the APR will help you analyze how good of a deal you are getting on the total package.  Keep in mind that some people will pay additional points in order to get a lower interest rate. In many cases a buyer may be more concerned about keeping their monthly costs lower and paying additional points can give them the opportunity to reach their targets.

How Does My Credit Score and DTI Affect My Loan?

Interest rates will vary a lot based on your credit history and also your DTI, also known as your debt to income ratio. The more regular and ontime your debt payments come in then banks will see you as a lower risk and often incentivize you with preferred interest rates. Your debt to income ratio plays a big role in helping you get approved for a loan. It looks at what percentage of your total income is spent paying debts. Depending on the types of debt and income you have your threshold may vary. If your lender denies you for a loan due to your DTI you can explore different types of loans or you can consider paying off other types of debts such as a car payment or credit card to get approved. A good lender will have the experience to guide you on what you need to do to get approved. Let us know if you would like us to connect you to one of our lenders we work with on a regular basis.

What Documents Will My Lender Request?

This can vary a bit depending on how many existing loans you have, what your income is, if you are self employed etc. The common ones most every lender will ask for are:

• Government Photo ID
• Social Security Card
• W2 for 2 years
• Paystubs for 30-60 Days
• Bank Statements
• 401K
• Investment Accounts
• Student Loan Statement
• Credit Card Statement
• Tax Returns

We recommend that you place all of these in a folder so you don't have to keep gathering these manually for every lender that you apply for.

We hope to have the opportunity to serve you in your search for a home in Katy, TX. Reach out to us on this website or give us a call. We have great working relationships with several lenders and we are happy to put you in touch.