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Buying a home can be exciting, exhausting and, no matter how smoothly the process may go, one of the most stressful things you can do in life. Not having enough money to adequately finance a purchase makes it all the more daunting. Fortunately, there are first-time homebuyer programs available in every state, making it easier for many people to access the resources they need to buy their new home, and to feel more secure through the whole process.
Keep in mind that first-time homebuyers don’t actually have to be buying their first home. A first-time homebuyer is defined as anyone who hasn’t had an ownership interest in a primary home in the past three years.
The U.S. Department of Housing and Urban Development (HUD) also includes in its list of qualified homebuyers:
• A single parent who has only owned a home with a partner while married
• A displaced homemaker who has only owned a home with a spouse
• Someone who has owned a principal residence not permanently affixed to a permanent foundation
• Someone who has only owned a property that wasn’t in compliance with state, local, or model building codes
Here are the homebuyer programs that qualified first-time buyers have available to them in the Northeast:
Maine
Thinking of buying a home in the land of lobster and lighthouses? You’ll want to learn about the market and assess your financial situation before you start searching for a home mortgage loan. (A guide to the different types of mortgage loans can help.)
The scoop on the Main market: Prices in the Pine Tree State were up 5.7% in February 2024 when compared to the prior year, with homes selling for a median of $360,200, according to Redfin. The three most competitive cities for homebuyers were Standish, South Berwich, and Gray.
💡 Learn about Maine first-time homebuyer programs
New Hampshire
The housing market in the Granite State is hot. From February 2023 to February 2024, home prices rose 12.5% to an average sale price of $447,400, according to Redfin. And 41.8% of the homes sold above their list price. Still, there are good opportunities for the first-time buyer in the state, and there are first-time homebuyer assistance programs to help you reach your homeowning goal.
💡 Learn about New Hampshire first-time homebuyer programs
Vermont
The Green Mountain State is paradise for outdoorsy types with forests, lakes, and mountains. No wonder then that the housing market has heated up: The number of homes sold increased 14.2% between February 2023 and 2024. Prices were up 6.5% as well, according to Redfin.
Homebuyers may need help to afford a home with the median price here hitting $361,300. Fortunately, the state has several programs to offer.
💡 Learn about Vermont first-time homebuyer programs
Massachusetts
Glorious New England scenery, a rich history, and diverse cultural and educational opportunities are just some of the things Massachusetts has to offer residents. It’s no wonder that home prices here outpace the national average, or that they are rising. Prices in Massachusetts were up 9.9% in the year ending February 2024, Redfin reports. The median sale price in the state is now $576,900.
At the same time, the median number of days a home stays on the market has dropped by 5 year-over-year, an indicator that the market is warming. Still, there are plenty of opportunities for the first-time homebuyer in Massachusetts.
💡 Learn about Massachusetts first-time homebuyer programs
Rhode Island
This small state is big on charm: Rhode Island’s miles of coastline offer beautiful beaches and picturesque inlets, and you’ll also find dynamic cities and rural small towns here. There’s a lot for the first-time homebuyer in Rhode Island to get excited about. But prices here are well above the national average of $342,941. The average property value is $438,711, up 8.3% year over year, according to Zillow. Wondering what a down payment would look like on a given property price? Use a mortgage down payment calculator to do the math.
💡 Learn about Rhode Island first-time homebuyer programs
Connecticut
You’re looking at a competitive market in the Constitution State: In February 2024, home prices in Connecticut were up 13.2% year-over-year. The median price of a Nutmeg State home is $375,300, according to Redfin, and the number of days a property stays on the market is declining. Fortunately you can still find affordable homes in Torrington and New Britain, among other affordable places in Connecticut.
💡 Learn about Connecticut first-time homebuyer programs
New York
The housing market in New York state can be challenging, especially for first-time buyers. Home prices in the Empire State in January 2024 were up 6.3% over the prior year, with a median sale price of $518,800. The number of days on the market dropped as well. A stunning 37% of homes sold above their listing price.
💡 Learn about New York first-time homebuyer programs
New Jersey
The Garden State saw record real estate sales in some areas in recent years as city dwellers fled to the suburbs. In the year ending February 2024, home prices in New Jersey were up 14.5% over the prior year, and the median sales price was $479,100. The median days on the market dropped 15 year-over-year to 46. Buyers in New Jersey need to prepare themselves to compete in this market.
💡 Learn about New Jersey first-time homebuyer programs
Pennsylvania
Thinking of buying a home in Pennsylvania? Prices rose 6.6% from January 2023 to January 2024, to a median of $264,700, Redfin reported. It’s a seller’s market here, so you may have to compete to get the home you want, especially in cities like New Castle (home prices were up more than 31% in a year) and Mechanicsburg (up 55.5%). Harrisburg and Lancaster ranked as some of the best affordable places to live in Pennsylvania.
💡 Learn about Pennsylvania first-time homebuyer programs
The Takeaway
Qualifying first-time homebuyers have many options available to them in the Northeast, including down payment assistance. If you’re looking to buy your first home and aren’t sure how to get started, researching homebuyer programs is a great place to start. Once you know what kind of assistance you may qualify for, it’s a good idea to estimate just how much house you can really afford using a home affordability calculator.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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Source: sofi.com
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*Rates and APYs are subject to change. All information provided here is accurate as of March 28, 2024.
Our writers and editors have invested thousands of hours analyzing and vetting lenders offering VA loans. Through exhaustive research, we’ve come up with a list of the best VA mortgage lenders for military members and their families, including Navy Federal, Rocket Mortgage and Veterans United. Read on for our Best VA loan lender reviews and a comprehensive lending guide on how to find and apply for a VA loan.
Money’s Main Takeaways
- VA loans are one of the main benefits the federal government offers to retired and active-duty members of the military
- Borrowers can qualify for a VA loan with a lower credit score and 0% down payment compared to conventional loans
- There is no private mortgage insurance, but borrowers will be required to pay a funding fee
- VA loans offer competitive interest rates compared to other loan options
Our Top Picks for Best VA Loan Lenders of April 2024
Best VA Loan Lenders Reviews
- Lowest fees on our list
- Non-VA mortgage options that require no down payment
- 356 branches worldwide
- No lender fees
- Small number of branches within the U.S.
- Membership strictly limited to military members, spouses, family members, veterans and the Department of Defense
- Customized rates only offered to members
HIGHLIGHTS
- Sample rate
- 5.750% (6.223% APR) on a 30-year fixed-rate purchase loan of $300,000
- Minimum credit score
- Unstated, VA recommendation of 620 is suggested
- Minimum down payment
- 0% for qualifying borrowers
- Availability
- Continental U.S.
- Pre-approval time
- Approximately 3 business days
- Mobile app
- Yes
- NMLS ID
- 399807
Why we chose it: A combination of low lender fees, several loan assistance programs and a wide selection of mortgage loans make Navy Federal Credit Union our best VA loan lender overall.
Navy Federal Credit Union offers military families low rates on financial products, such as personal loans, auto loans and credit cards. The credit union’s VA home loan program features a fast pre-approval process and loan options with no down payment. No PMI is required, either. Navy Fed also recently introduced its no-refi rate drop, where you could qualify for an interest rate reduction without going through the refinancing process.
Additionally, Navy Federal’s Shop & Lock feature allows you to lock in your rate for up to 60 days while you shop for a home, plus an additional 60-day lock once you’ve submitted a purchase agreement. Other perks include up to $9,000 cash back for working with a real estate agent at RealtyPlus, the credit union’s real estate service and a rate match guarantee where Navy Federal will match a better rate offered by another lender or give you $1,000 if all qualifying conditions are met.
Membership is required to use Navy Federal’s services. All active duty, retired and veteran service members of all armed forces branches — plus their families, immediate relatives and some household members — are eligible. Membership is also open to Department of Defense civilian personnel. To become a member, you simply open a savings account with a minimum of $5.
- Access to your loan information is available 24/7 with the proprietary mobile app
- Credit scores as low as 580 accepted
- Debt-to-income ratios as high as 60% accepted
- No HELOCs offered
- No USDA loans offered
- No physical locations for in-person service
HIGHLIGHTS
- Sample rate
- 5.99% (6.429% APR) with 2.125 points purchased ($5,843.75) on a purchase loan of $275,000
- Minimum credit score
- 580
- Minimum down payment
- 0% for qualifying borrowers
- Availability
- All 50 U.S. states
- Pre-approval time
- 10-15 minutes
- Mobile app
- Yes
- NMLS ID
- 3030
Why we chose it: Rocket Mortgage’s (formerly Quicken Loans) fully online application and closing process, along with its multiple tools for keeping track of your in-process and existing loans make it our pick for best online VA loan lender.
Rocket Mortgage is an online lender that stands out for its relatively seamless online mortgage application process. While the experience may vary depending on each borrower’s situation, Rocket Mortgage’s website and mobile app allow you to submit all of your paperwork digitally and track every step of your loan’s processing.
While you have the option of speaking with a live representative, you can also communicate with Rocket Mortgage through online or mobile messaging.
Although Rocket Mortgage doesn’t have the broadest loan offering, it does work with all the major VA loans (purchase, refinance, IRRRL) and considers credit scores as low as 580 and debt-to-income ratios as high as 60%. Borrowers buying a home through Rocket Homes and financing through Rocket Mortgage could get a 1.25% closing credit, up to a maximum of $10,000.
For more detailed information, read our full review of Rocket Mortgage (Quicken Loans).
- Broader selection of veteran-focused loans than competitors
- Offers real estate services for veterans
- Customer support is available 24/7
- No HELOC products offered
- Only 26 affiliate branches across 17 states
HIGHLIGHTS
- Sample rate
- 5.875% (6.307% APR) with 1.5630 points purchased ($4,610.85) on a 30-year fixed-rate purchase loan of $295,000
- Minimum credit score
- 600
- Minimum down payment
- $0 for qualifying borrowers
- Availability
- All U.S. states
- Pre-approval time
- Not stated
- Mobile app
- Yes
- NMLS ID
- 1907
Why we chose it: Veterans United offers more veteran-focused mortgage options than the standard purchase, refinance and streamline products, making it our choice for best VA loan lender for VA loan variety.
Veterans United guarantees more loans than any other VA-approved lender, according to The Department of Veterans Affairs. The VA compiles a list each month of the top lenders, and Veterans United Home Loans hasn’t budged from its number-one spot in more than six months.
In addition to its reasonable qualifying credit score and income requirements, Veterans United offers a wide variety of loan types: purchase, refinance, IRRRL (streamline) VA loans, Jumbo VA loans, VA energy-efficient mortgages and VA cash-out refinance loans.
Jumbo VA loans can be a good option for veterans who no longer have their full VA entitlement, which means that their VA loans have a limit placed on the total amount borrowed (unlike veterans with full entitlement). Energy-efficient mortgages are not common to VA loans and are a good option for anyone looking to add energy-efficient improvements to their new home.
- Second-lowest fees of any lender we’ve reviewed
- Loan amounts up to $1 million
- No PMI insurance required
- Alternative or non-traditional credit and income data not considered for loan applications
- Funding fee required
HIGHLIGHTS
- Sample rate
- 5.75% (6.024% APR) with 1.125 points purchased on a 30-year fixed-rate purchase loan of $450,000
- Minimum credit score
- 620
- Minimum down payment
- 0% for qualifying borrowers
- Availability
- All U.S. states
- Pre-approval time
- Within three business days
- Mobile app
- Yes
- NMLS ID
- 401822
Why we chose it: PenFed currently offers the lowest mortgage rate for a 30-year fixed-rate loan, which makes it our pick for the best VA loan lender for competitive rates.
When it comes to VA loans and mortgages, PenFed Credit Union stands out for offering some of the lowest rates across the board on conventional, FHA, VA, Jumbo and adjustable-rate mortgages. Eligible borrowers may qualify for zero down payment. Additionally, PenFed doesn’t require borrowers to acquire private mortgage insurance (PMI).
You must be a member of PenFed to use PenFed’s VA loan services, but joining is an easy process: Simply open a savings account at the credit union with a minimum of $5.
For more detailed information, read our full review of Penfed.
- Accepts credit scores as low as 600
- Variety of mortgage products available
- Self-employment and nontraditional income accepted
- Physical branches only in Missouri
- Other fees apply
HIGHLIGHTS
- Sample rate
- 6.625% (6.864% APR) on a 15-year fixed-rate purchase loan of $300,000
- Minimum credit score
- 600
- Minimum down payment
- 0% for qualifying borrowers
- Availability
- All U.S. states
- Pre-approval time
- Not stated
- Mobile app
- Yes
- NMLS ID
- 400039
Why we chose it: North American Savings Bank is dedicated to servicing customers in the Kansas City, MO area, but it extends its mortgage services to individuals all over the U.S. Notably, NASB works with borrowers with credit scores as low as 600, lower than what other many lenders allow.
No origination fees are charged on VA loans from NASB, but a VA loan funding fee may be required. Many loans don’t require a down payment, either. NASB offers a loan payment calculator on its site where borrowers can see potential VA home loan rate scenarios.
In addition to standard VA loan products (purchase, IRRRL, cash-out refinance), North American Savings Bank offers the widest variety of mortgage options for individuals who are unable to provide “traditional” credit and income data, such as people who are self-employed.
- VA Cash-out refinance, IRRRL and Jumbo IRRRL available
- Discounts for bundling services (e.g. home and auto insurance)
- Variety of discounts through USAA Perks (car rental, travel, shopping)
- Requires membership in USAA
- No home equity loans or lines of credit
HIGHLIGHTS
- Sample rate
- 6.125% (6.447% APR) with 0.801 points purchased for a fixed-rate purchase loan and 5.875% (6.196% APR) with 0.933 points purchased for a VA Jumbo purchase loan
- Minimum credit score
- 620
- Minimum down payment
- 0% for qualifying borrowers
- Availability
- All U.S. states
- Pre-approval time
- Not disclosed
- Mobile app
- Yes
- NMLS ID
- 401058
Why we chose it: For those looking to refinance their existing VA loan, USAA offers all of the possible options with competitive rates and terms.
USAA stands out as a VA loan refinance leader for offering all the available options: VA Interest Rate Reduction Refinance Loans (IRRRL), VA Jumbo Interest Rate Reduction Loans, VA Cash-Out Refinance Loans and Jumbo VA Cash-Out Refinance Loans. With either cash-out refinance, you can refinance up to 90% of your home’s value. With IRRRLs, you can refinance up to 100%.
However, rates at USAA aren’t the lowest among the lenders in our top picks. Still, the company’s rates are within the typical range for the market and the option to finance your VA funding fee into your total loan amount is available with all four refinance types.
USAA offers additional financial products and services, such as insurance, banking and investing. All of its products are available only to members. Military members, veterans, their spouses, children, and pre-commissioned officers are eligible.
Members also get discounts for bundling (e.g. home and auto insurance) as well as discounts on car rentals, travel packages, home security, moving services, select retailers and more.
*USAA does not disclose the credit score, loan amount or down payment of its advertised rates. To get a better estimate of your potential monthly payment, use the USAA VA Home Loan Mortgage Payment Calculator.
- Allows you to compare multiple mortgage lenders’ rates at the same time
- Over 1,500 partnered lenders in its network
- Offers credit monitoring tools
- Limited contact options
- Customer support does not address issues with the lender of your choice
- Does not service loans
HIGHLIGHTS
- Minimum credit score
- Varies by lender
- Minimum down payment
- Varies by lender
- Availability
- Varies by lender
- Pre-approval time
- Varies by lender
- Mobile app
- Yes
- NMLS ID
- 1136
Why we chose it: LendingTree is an online marketplace that allows you to compare rates on multiple products, from mortgages to personal loans and even credit cards, making it our pick for the best marketplace for comparing VA loan rates.
LendingTree stands out from its competition due to its more than 1,500 partnered mortgage lenders and easy-to-use mobile app.
Borrowers can request multiple quotes (up to three at the same time), which include projected rates and closing costs all in one place. It is also free to use and doesn’t impact your credit score.
The only notable downside to LendingTree’s services is that the company is not a loan servicer or originator, meaning that its customer support will not handle most issues that may come up during your loan process.
LendingTree does not provide sample rates for VA loans specifically. However, you can use the online marketplace’s mortgage comparison tool to check potential rates.
For more details read our full review of Lending Tree.
- Minimum credit score is 580
- “I CAN” loan offers customizable loan terms
- Buydown option to lower interest rate for first 1-3 years
- No interest rate or APR info publicly available
- Must enter contact info to get rate estimates
HIGHLIGHTS
- Sample rate
- 6.250% (6.563% APR) with 3 points purchased on a 30-year fixed-rate for a purchase loan of $726,200
- Minimum credit score
- 580
- Minimum down payment
- 0% for qualifying borrowers
- Availability
- All 50 U.S. states
- Pre-approval time
- Within 24 hours
- Mobile app
- Yes
- NMLS ID
- 6606
Why we chose it: New American Funding is our top pick for low credit score requirements for VA loans. While its 580 minimum credit score requirement is not unique on the list, it has a vast selection of mortgage loans. Beyond the VA Purchase Loan, there’s also a VA Native American Direct Loan, VA Energy Efficient Mortgage, VA Streamline Refinance Loan and VA Cash-Out Refinance.
Notably, it offers what NAF refers to as an “I CAN” loan, which allows you to choose a custom fixed loan term between eight and 30 years. It also offers a “buydown mortgage” option for VA loans, which allows borrowers to reduce the interest rate on their mortgage for the first one to three years of their loan.
To get a quote, you must contact a representative online or by phone, which requires providing personal information — first and last name, email address and phone number.
For more detailed information, read our full review of New American Funding.
- Over 400 branches across 48 states
- Accepts credit scores as low as 580
- Offer specialized mortgages for physicians
- No branches in Alaska or West Virginia
- Rates not disclosed unless you call or submit an online form requesting a callback
- Phone customer service hours (M-F, 8:30 am-5 pm CST) may be too restrictive for some
HIGHLIGHTS
- Sample rate
- Unavailable
- Minimum credit score
- 580
- Minimum down payment
- 0% for qualifying borrowers
- Availability
- Licensed in all 50 U.S. states; in-person service available in ll U.S. states except Alaska and West Virginia
- Pre-approval time
- Undisclosed
- Mobile app
- Yes
- NMLS ID
- 2289
Why we chose it: Fairway Independent Mortgage’s presence in 48 out of 50 U.S. states makes it our top pick for in-person mortgage loan servicing.
Fairway Independent Mortgage is notable for its many branches across all but two U.S. states (Alaska and West Virginia), making it an ideal choice for individuals who prefer in-person service. The company offers VA mortgage loans with 100% financing if you have full VA entitlement.
A down payment will be required if you don’t have full VA entitlement or the loan exceeds the VA county limits. Like other VA loan lenders, Fairway Independent Mortgage also considers factors such as credit score and income when determining loan terms.
Fairway also offers a broad range of mortgage products which can be helpful for those who are unable to qualify for a VA loan. Among these loan products are specialized physician loans aimed at medical professionals still working through repaying their student loans.
For more detailed information, read our full review of Fairway Independent.
Other VA loan lenders we considered
While there are many mortgage lenders with outstanding products and features, they don’t necessarily have everything that could make them one of our top picks.
We reviewed the following lenders, and while they meet some of our criteria for “Best VA home loan lenders” (low rates, VA loan experience, good customer service), they ultimately didn’t make the cut.
Freedom Mortgage
- 550 credit score minimum is the lowest on our list
- Fully online loan process
- Variety of calculators and educational resources on their site
- Rates are only provided by calling for an estimate or signing up for online alerts
- High number of CFPB complaints
- Does not offer HELOCs
Why Freedom Mortgage didn’t make the cut: The lender has over 2,800 complaints lodged with the Consumer Financial Protection Bureau since March 2021. The Better Business Bureau has received over 1,200 complaints about the lender in the last three years and its accreditation was revoked.
Freedom Mortgage is a fully online lender that offers standard mortgage products such as conventional purchase and refinance loans, FHA, VA and USDA loans. What makes it stand out is its credit score requirement of 550 for VA loans, which is the lowest of any lender we considered.
Veterans First
- Fully online loan process, helpful for military members deployed overseas
- Educational resources
- Specializes in VA loans
- Higher credit score requirements than any lenders we’ve reviewed (mid-600s)
- Offers no home equity loans
- No rate information on its website
Why Veterans First didn’t make the cut: The higher-than-average credit score requirement (mid-600s) was a deciding factor in keeping it out of our top list.
Thanks to its fully online mortgage process, Veterans First (NMLS ID 449042) is a great choice for military members deployed overseas. Its focus on VA loans also means that the company is better prepared to attend to the specific needs of military members and veterans during the mortgage process.
Paramount Bank
- Origination fees waived for VA loans
- No prepayment penalties for VA loans
- No fee or rate information on its website
- No information on loan requirements on its website (minimum credit score, DTI, etc.)
Why Paramount Bank didn’t make the cut: Its general lack of upfront information about rates, fees and credit score requirements kept it out of our top lenders.
Paramount Bank (NMLS ID 551907) waives the lender’s origination fee ($1095) on all of its VA loans, making it an option worth considering. There are no prepayment penalties, either.
Flagstar Bank
- Considers credit scores as low as 580 for VA loans
- Collaborates with down payment assistance and other special mortgage programs
- Large selection of mortgage products for those who don’t qualify for a VA loan
- Branches located in only 28 states
- $75 annual fee for home equity line of credit (HELOC) loans
- High number of complaints with CFPB in the last three years (1,000+)
Why Flagstar Bank didn’t make the cut: Flagstar’s lack of branches in almost half of the U.S. and limited rate and fee information on its website kept it out of our top picks. For more details, read our full review of Flagstar Bank.
Flagstar Bank (NMLS ID 417490) is a notable mortgage lender thanks to its wide variety of mortgage loans offered and its collaboration with several special mortgage programs such as down payment assistance and home loan grants.
PNC
- Mortgage rate calculator allows for scenarios with credit scores as low as 620
- Individuals with credit scores under 620 may be offered alternative loan options
- Mortgage rates are only slightly above average (~0.2%)
- Relatively small selection of loan products
- No specialized VA loans
- Contact information and branch locations are not easy to locate
Why PNC didn’t make the cut: While full details aren’t available without speaking to an agent, PNC’s rate calculator shows rates slightly higher than many of our top picks.
PNC (NMLS ID 446303) has a standard offering of mortgage products, including conventional, FHA, VA, refinance and HELOC loans. PNC only offers a partially online loan application process. You can perform a digital income and asset verification, but you must speak with a loan officer to go over your loan details.
LoanDepot
- Strong focus on digital mortgage processing allows a fully online mortgage experience
- Over 200 affiliate branches nationwide
- Credit score minimums and loan eligibility criteria are not disclosed upfront
- Relatively small loan offering
- No HELOCs offered
Why LoanDepot didn’t make the cut: Its website doesn’t disclose credit score and other loan eligibility requirements. For more details, read our full review of LoanDepot.
LoanDepot (NMLS ID 174457) is a primarily online mortgage loan lender with several affiliate branches across the U.S. Its loan products include conventional purchase mortgages, FHA, VA, ARM (adjustable-rate) and 203k (FHA home renovation) loans. LoanDepot’s digital income and assets verification tools can significantly speed up the loan approval process in some cases.
Guild Mortgage
- Broad mortgage loan offering, including energy-efficient home mortgages
- Accepts down payment assistance programs
- Services its own loans
- Rates are only disclosed after reaching out to Guild
- No branches in IN, KY, MI, MN, MS, NY, or WV
Why Guild Mortgage didn’t make the cut: No rate information is publicly available; you must contact Guild for details. For more information, read our full review of Guild Mortgage.
Guild Mortgage (NMLS ID 3274) offers a variety of mortgage options beyond VA loans, including bridge mortgages that can help you sell your current home while shopping for a new one and energy-efficient mortgages.
Guild is also a good choice for people who prefer in-person service, since they have branches in all but seven U.S. states. Notably, Guild services its loans, which is something that not all mortgage loan originators do.
Guaranteed Rate
- Housing market research tool available
- Home valuation tool available
- Credit scores as low as 580 accepted for VA loans
- Conventional mortgage rates are higher than average (around 0.7% higher)
- Limited offering of VA loan products
Why Guaranteed Rate didn’t make the cut: Its VA loan product offerings are limited.
Guaranteed Rate (NMLS ID 2611) is a mortgage lender that allows borrowers to fully process their loan applications online, from start to finish. Individuals who prefer in-person service can also go to one of its 500+ locations across 46 states.
Movement Mortgage
- Offers several high-balance mortgage products (jumbo loans)
- Considers credit scores as low as 580 for VA loans
- Down payment assistance options available
- Streamlined underwriting process that can close loans in as little as a week
- Mortgage rates can only be obtained after contacting Movement
- No 24/7 customer service
- No physical locations
Why Movement Mortgage didn’t make the cut: Rate information isn’t publicly available to potential borrowers; you must contact the company for details. For more information, read our full review of Movement Mortgage.
Movement Mortgage (NMLS ID 39179) is an online mortgage lender that claims to be able to fully close on a loan in under two weeks, though these results will depend on each borrower’s situation. Notably, Movement considers credit scores as low as 580 for VA loan applications, well under the VA’s suggested 620.
Besides its VA loan products, Movement also has several down payment assistance and high-balance mortgage options, which are helpful for individuals looking to purchase in high cost-of-living areas.
NBKC Bank
- Provides nationwide mortgage service, despite being a regional bank
- Mortgage rate calculator allows credit scores in the 300s
- Offer specialized mortgages for pilots
- Only four branches split between Kansas and Missouri
- Mortgage rates can be as much as 1.5% higher than our top picks
- Mortgage rate calculator is not easy to access
Why NBKC Bank didn’t make the cut: Its VA loan rates are a bit higher than those of our top picks. For more details, read our full review of NBKC.
NBKC Bank (NMLS ID 409631) is a Kansas/Missouri regional bank that extends its mortgage services nationwide. While its loan offerings are standard (conventional, FHA, VA), it offers specialty home loans for pilots.
Notably, it is one of the few lenders that allows customers to obtain mortgage rates for credit scores under 500, although you’re not guaranteed results below that threshold. Its mortgage rates are also considerably higher than average (up to 1.5% higher).
VA Loans Guide
A VA loan is a home loan issued by private lenders and backed by the U.S. Department of Veterans Affairs (VA). Read on to learn more about VA home loans, their pros and cons, the associated costs and how to apply.
How does a VA loan work?
VA loans are one of the main benefits the government provides to active duty and retired members of the armed forces. Eligibility will depend on the borrower’s years of service. There are also property requirements that must be met. Read more on VA loans to find full details and see how a VA loan can help you achieve your homeownership goal.
Beyond military service requirements, some VA loan lenders require specific standards of creditworthiness. These details will vary by lender, but can include a credit score of 620 or higher and a debt-to-income ratio of 41% or less. (You can calculate your specific percentage using our debt-to-income ratio calculator.)
VA loans offer two big advantages for qualifying homebuyers. There is no required down payment, and the mortgage rates tend to be lower than those on conventional mortgages or FHA loans. Both of these features make a VA loan a more affordable financing option, especially for first-time homebuyers.
The VA no longer places maximum loan limits, but your VA mortgage lender might. In most U.S. counties, the maximum loan amount for 2024 is $766,550, but it can be as high as $1,149,825 in more expensive areas. Jumbo loans will have a higher limit.
Types of VA loans
The U.S. Department of Veterans Affairs offers four different types of mortgages — VA purchase loan, interest rate reduction refinance loan (IRRRLs), cash-out refinance loan, and Native American direct loan — each with its own set of requirements and limitations. Evaluate all loan options before deciding which best VA mortgage lender suits your needs.
Purchase loan
Purchase loans are used to finance the buying of a primary residence, make energy-efficient upgrades to an existing home or buy property to build a house. They cannot be used to buy investment properties, vacation homes, rental properties or fixer-uppers in need of significant repairs.
To learn more, read our guide on VA purchase loans.
Interest Rate Reduction Refinance Loan (IRRRL)
Designed to refinance an existing VA mortgage, a streamlined refinance can get you a lower interest rate, reduce the loan term, or go from a variable-rate to a fixed-rate mortgage.
Cash-out refinance loan
A VA cash-out refinance allows you to access the equity you’ve built up in your home by applying for a new mortgage with a higher balance. The proceeds of the new loan will pay off your old mortgage and you’ll receive the excess amount in the form of a lump sum payment.
Learn more about how to tap into your home equity with a VA cash-out refinance or read our guide on on how to refinance a VA loan to get more information on refinancing.
Native American Direct Loan (NADL)
NADL is the only VA loan managed and funded directly by the government entity. Veterans who are Native American (or whose spouses are Native American) are eligible for this loan. Borrowers can use this loan to buy, build, or improve a home on federal trust land.
As of this writing, there is no limit to the amount of money that can be borrowed with this program (aside from the limitations imposed by creditworthiness, DTI, and general Fannie Mae/Freddie Mac conforming limits, though borrowers can access higher limits if they choose to make a down payment).
Additional VA-backed loan programs
VA Energy Efficient Mortgage (EEM)
Finance energy efficient home improvements, such as a solar water heater, solar panels, storm doors on windows and furnace efficiency modifications, through an EEM. Ineligible home upgrades include A/C units, vinyl siding and new roofing or shingles.
VA renovation loan
Also called a VA rehab loan or a reno loan, a VA renovation loan is a way to include the cost of home repairs and improvements in your VA home loan amount. No luxury upgrades are allowed. This loan is intended for repairs such as heating and cooling system replacement, upgrades to make the home more accessible for people with disabilities and the replacement of old appliances.
VA loans for manufactured homes
You can get financing for a manufactured home, also known as a mobile home or a modular home. However, there is a 25-year maximum loan term on larger units, and a 20-year loan term limit on smaller units. Lender credit requirements for VA mobile home loans may also be higher than loans for conventional homes. The mobile home must also have a permanent foundation and comply with safety standards set by the U.S. Department of Housing and Urban Development (HUD).
To explore other home loan options or check out current mortgage rates, our page of the best mortgage lenders can be an excellent place to start.
There are specific requirements you must meet to qualify for a VA home loan.
How to qualify for a VA Loan
There are specific requirements you must meet to qualify for a VA home loan.
The VA home loan program and its military benefits are available for:
- Active-duty military members
- Veterans
- Past and present members of the National Guard
- Surviving spouses of military personnel who died in combat
A VA home loan does not have a minimum credit score requirement, but most participating VA loan lenders require a minimum credit score of 620. Our advice? Always check your credit report and debt-to-income ratio before applying for a loan and improve it if you can. (Be sure to read our guide on how to dispute your credit report.)
Service requirements
VA loan eligibility depends on the length of service of the applicant. These are the requirements as set by the VA:
- Veterans and active-duty service members must have served at least 90 days during wartime or 181 days during peacetime.
- National Guard members must have served at least 90 days of active-duty service during wartime or six years of creditable service in the Select Reserves or Guard.
- Two kinds of discharges from military service may affect eligibility determination: Other Than Honorable (OTH) and Bad Conduct.
- The specific circumstances of a veteran’s discharge will be considered, which could take Veterans Affairs (VA) months to evaluate.
In all cases, once deemed eligible, you must apply for a Certificate of Eligibility (COE). The COE proves to the VA mortgage lender that you meet the VA’s eligibility requirements.
How to apply for a VA home loan
After confirming eligibility for a VA loan, take the following steps to apply:
- Shop around for a lender and compare rate quotes before settling on the one that best fits your needs.
- Submit your loan application. The lender will request a VA appraisal of the house. The lender reviews the appraisal, your credit history and income and decides if it accepts your loan application.
- Apply for your COE and contact your state’s regional VA loan center to start the process directly with the government, in the case of Native American Direct Loans.
Once your lender accepts your application, they’ll work with you to select a title company (or entity) to close on the house.
If you have any questions that your lender can’t answer, please call your VA regional loan center at 877-827-3702. You can also watch a video on the official U.S. Dept. of Veteran Affairs’ YouTube page to learn more about VA home loans and how to apply.
How to get a VA loan with bad credit
Some lenders will issue a VA loan to veterans and service members with credit scores as low as 580 or lower. Freedom Mortgage, for example, will accept a credit score as low as 550. However, most lenders will require a minimum credit score of 620.
If you don’t meet the minimum credit score required, you should work on improving your personal finances. Paying the bills on time, paying off any debt you currently have and contacting the reporting agency to fix any errors are some steps that can help improve your score.
More About VA Mortgage Loans
Best VA Loan Lenders FAQs
What is a VA home loan?
A VA loan is a no-down-payment mortgage military benefit partially backed by the Department of Veterans Affairs (VA). Borrowers can use the loans for the purchase of a primary residence or to refinance an existing mortgage.
Who qualifies for a VA loan?
To qualify for a VA loan, you or your spouse must meet the basic service requirements set by the Department of Veterans Affairs (VA), have a valid Certificate of Eligibility, and meet the lender’s income and credit requirements.
How many times can you use a VA loan?
You can use a VA loan more than once but only to purchase or refinance a principal residence, provided you meet the availability requirements. However, you may be able to use a partial entitlement for a second loan if you haven’t used it all on your first mortgage. Remember that using a partial entitlement may mean you’ll need to shell out a down payment and a higher VA funding fee.
Are VA loans assumable?
Because VA loans are backed by the U.S. government, they can be assumed by a new lender even if they are not active military or veterans. In order to assume a VA loan, the new borrower must have a minimum credit score of 580, a DTI of 45% or lower, pay the VA funding fee and ensure the home will be their primary residence. In some cases, a down payment may also be required.
How long does it take to close a VA loan?
VA loans typically take a little longer than a traditional mortgage loan to close. Although the experience may vary from one person to another, VA loans take about 50 to 55 days to close on average. However, it is possible to close on a VA in as little as 30 days in some cases.
Does a VA loan require mortgage insurance?
No, VA loans do not require private mortgage insurance or any other type of mortgage insutance that is required by other loan types, such as conventional and FHA loans. The lack of an insurance requirement is one of the main benefits of obtaining a VA loan, along with not having to make a down payment.
Do VA loans have closing costs?
Yes, VA loans have closing costs, which can amount to 3% to 6% of the loan amount. These costs include fees associated with the loan origination and underwriting, title insurance and recording fees and the VA appraisal fee, among others. The VA funding fee, which ranges between 1.25% and 3.3% of the loan amount, is also due at closing but can be rolled into the loan. The home seller can pay up to 4% of the closing costs on a VA loan.
How We Chose the Best VA Loan Lenders
Given that many mortgage lenders offer similar products across the board, we narrowed our search criteria to three factors: rates, experience and customer service.
- Rates – We chose VA loan lenders that offered the lowest rates to ensure your mortgage payments fall in line with your budget.
- Experience in VA Loans – We prioritized VA mortgage lenders that process many VA loans. Having a VA mortgage lender who is familiar with this process ensures that every step of your home purchase is taken care of on time.
- Customer Service – We highlighted VA mortgage lenders that excel in customer satisfaction and provide first-time homeowners step-by-step guidance throughout the pre-approval, application and loan closing.
We also made sure that our picks are registered with the Nationwide Multistate Licensing System and Registry (NMLS) and meet the minimum certification requirements for mortgage lending.
Though we always try to include accurate and up-to-date information on regulatory and legal actions, we don’t claim this information is complete or fully up to date. Interest rates and annual percentage rates are subject to change. As always, we recommend you do your own research as well.
Summary of Money’s Best VA Home Loan Lenders of April 2024
Source: money.com
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Along with the thrill of home shopping comes the daunting task of finding a mortgage to help pay for it. Before you become disheartened, keep this in mind: With several types of loans available, you may have more ways to qualify than you think. Each has its own down payment, credit score, and borrowing requirements.
Understanding your options can help you shop with confidence and secure the best type of financing for your needs.
These are the key categories of home loans you should be familiar with when you’re looking for a mortgage:
- Conventional: A conventional loan is the most common type of mortgage. It may be right for you if your credit score is at least 620 and you wouldn’t benefit from a government loan. The Federal Housing Finance Agency sets limits for how much you can borrow with a conventional conforming loan. In 2024, the limits for a single-family or one-unit home are $766,550 in most counties.
- Jumbo: If you want to borrow more than the conventional conforming limit, you can get a conventional conforming jumbo loan for up to $1,149,825 for a single-family home in high-cost counties. For even larger purchases, lenders offer nonconforming jumbo loans.
- Government: This category includes FHA loans for borrowers with credit scores below 620, USDA loans for borrowers in rural areas, and VA loans for military service members, veterans, and surviving spouses. The U.S. government guarantees a portion of the borrower’s principal to encourage lenders to offer mortgages to people who might otherwise have trouble qualifying.
- Fixed-rate loans: Any of the above categories of loans will typically have a fixed interest rate for the life of the loan. A fixed-rate loan provides financial predictability: Your monthly principal and interest payment will be the same each month.
- Adjustable-rate loans: Conventional, government, and jumbo loans can also have an adjustable interest rate that stays the same for the first few years, then periodically changes based on market conditions.
Learn More: VA loan vs. conventional loan: How to choose
Here’s a quick overview to help you understand the differences between conforming and nonconforming mortgages.
While less common, these mortgage types can be a good fit for certain borrowers:
- Piggyback loans: These loans allow you to finance 10% of the purchase price with a second mortgage to supplement your down payment. If you only have 10% saved for your down payment, you can use a piggyback loan to help you make a 20% down payment and avoid private mortgage insurance. Low-down-payment loans typically require mortgage insurance.
- Physician loans: These loans are for doctors, dentists, optometrists, and certain other medical professionals who are actively or about to start practicing, completing a residency, or completing a fellowship. Physician loans account for characteristics common to these borrowers, such as high student debt, limited down payments, and high earning potential.
- Balloon mortgages: With a balloon mortgage, you pay interest but no principal or less than the fully amortized amount of principal with each monthly payment. After a certain number of years, the remaining principal balance is due as a lump sum called a balloon payment.
- Nonqualified mortgages: Specialty lenders offer these home loans to borrowers with less common situations that require more creative financing. Physician loans and balloon mortgages fall into this category. So do bank statement loans, large jumbo loans, investment property loans based on a property’s cash flow, and loans for borrowers with a recent bankruptcy or foreclosure.
There isn’t a single best type of mortgage, which is why lenders offer different types for different borrowers. Here’s how to choose a home loan that will meet your needs:
- Know your credit score: If your score is below 620, you’ll be limited to FHA loans and nonqualified mortgages (also called non-QM loans). If you have time to work on your score before getting a mortgage, focus on getting above 620 to increase your options. If not, plan to focus on FHA and non-QM loans, but be prepared to pay mortgage insurance premiums for the life of the loan with an FHA loan or pay a higher mortgage rate and fees with a non-QM loan.
- Find out what special programs you may be eligible for: If you have qualifying military service, you may be eligible for a VA loan. If you’re far from the ideal loan candidate and want to buy in a rural area, you may be eligible for a USDA loan. If your income is less than 80% of the area median for your household size, you may be eligible for down payment assistance. These programs offer significant advantages, so you’ll want to consider them if you qualify.
- Take stock of your cash reserves: Estimate what your total monthly living expenses will be after you get your mortgage and multiply the result by three. Next, calculate how much money you can afford to take out of your savings for a down payment and closing costs — or factor in what you may qualify for through one of the programs mentioned above.
- Know your target price range: If you want to borrow more than the conforming loan limit in your area, plan to apply for a jumbo loan, which may also mean saving at least 10% of the purchase price for your down payment. Otherwise, you’ll want to consider conventional and government loans first because they’re widely available.
- Understand the risks and additional costs: Low-down-payment conventional loans and all FHA loans require borrowers to pay for mortgage insurance that protects the lender in case the borrower defaults. Making a small down payment also puts you at risk of owing more than your home is worth if home prices fall, which could be a problem if you need to move or want to refinance. Adjustable-rate loans have future payment uncertainty. Mortgages with higher interest rates can be expensive in the long run. There’s no guarantee you’ll be able to refinance into a stable fixed-rate mortgage or get a lower rate.
Find out: How to buy a house in 2024
Your mortgage lender will be able to tell you the specific reasons why you were denied a mortgage. It could be as simple as accurate information on your application or due to more complicated factors, like your credit history or income. Another possibility is that your financial profile doesn’t match the lender’s risk tolerance.
Whatever the reason, work on fixing the problems so a lender will approve you at a reasonable interest rate.
Down payment requirements depend on the type of home loan you’re seeking.
Certain loans — like VA or USDA mortgage loans — can be extended to you without a down payment. Conventional mortgages require 3% down, and FHA loans require 3.5% down.
If making a substantial down payment is difficult due to income constraints, you may qualify for a down payment assistance program through your state or lender.
If your income is low to moderate for the area where you want to buy, you may qualify for down payment assistance through a state or lender program.
The main difference between a first and second mortgage is who has first rights to the proceeds if a home is foreclosed.
If a borrower ends up in foreclosure, the proceeds from the forced sale of the home go to the first mortgage lender before the second mortgage lender gets anything. First mortgages are, therefore, less risky for lenders and have lower rates than second mortgages. For example, a home equity loan would be a second mortgage if you took it out while still paying off your first mortgage — the one you bought your home with.
Source: foxbusiness.com
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A home equity loan is a lump sum of money you can borrow at a fixed rate based on the equity, or ownership stake, in your home. If you already paid off 15% to 20% of your house, this one-time installment loan can be used to cover major expenses, from home renovations to paying off debt.
Home equity loans have fixed interest rates, so your monthly payments are predictable and easy to budget for. But because your home acts as collateral for the loan, you could risk foreclosure if you fall behind on repayments.
I’ve spoken with experts about the advantages and disadvantages of home equity loans, how they work and where to find the best rates. Here’s what I’ve uncovered.
This week’s home equity loan rates
Here are the average rates for home equity loans and home equity lines of credit as of March 27, 2024.
Loan type | This week’s rate | Last week’s rate | Difference |
---|---|---|---|
10-year, $30,000 home equity loan | 8.73% | 8.73% | None |
15-year, $30,000 home equity loan | 8.70% | 8.70% | None |
$30,000 HELOC | 9.01% | 8.99% | +0.02 |
Current home equity loan rates and trends
Though home equity loan rates will vary depending on the lender and loan type, their rates are generally lower than personal loans or credit card annual percentage rates.
Home equity loan rates aren’t directly set by the Federal Reserve, but adjustments to the federal funds rate impact the borrowing cost for financial products like home equity loans and home equity lines of credit, aka HELOCs.
Since March 2022, the Fed has hiked its benchmark rate a total of 11 times in an attempt to slow the economy and bring inflation down, driving home equity loan rates up alongside. Though the Fed has kept interest rates steady since last summer, home equity loan rates have remained elevated for borrowers. Home equity rates are likely to stay high until the central bank begins cutting interest rates, projected for later this year.
With home equity loans, you tap into your equity without giving up the rate on your primary mortgage, making them a popular alternative to cash-out refinances. If you use a home equity loan to install solar panels or renovate your kitchen, you get the added benefit of increasing your home’s value.
“Most homeowners with mortgages in 2024 are choosing home equity loans or HELOCs, instead of a cash-out refinance, to avoid losing their attractive interest rates,” said Vikram Gupta, head of home equity at PNC Bank.
Best home equity loan rates of March 2024
Lender | APR | Loan amount | Loan terms | Max LTV ratio |
---|---|---|---|---|
U.S. Bank | From 8.40% | Not specified | Up to 30 years | Not specified |
TD Bank | 7.99% (0.25% autopay discount included) | From $10,000 | 5 to 30 years | Not specified |
Connexus Credit Union | From 7.20% | From $5,000 | 5 to 15 years | 90% |
KeyBank | From 10.29% (0.25% autopay discount included) | From $25,000 | 1 to 30 years | 80% for standard home equity loans, 90% for high-value home equity loans |
Spring EQ | Fill out application for personalized rates | Up to $500,000 | Not specified | 90% |
Third Federal Savings & Loan | From 7.29% | $10,000 to $200,000 | Up to 30 years | 80% |
Frost Bank | From 7.3% (0.25% autopay discount included) | $2,000 to $500,000 | 15 to 20 years | 90% |
Regions Bank | From 6.75% to 14.125% (0.25% autopay discount included) | $10,000 to $250,000 | 7, 10, 15, 20 or 30 years | 89% |
Discover | 6.99% for 1st liens, 7.99% for 2nd liens | $35,000 to $300,000 | 10, 15, 20 or 30 years | 90% |
BMO Harris | From 8.84% (0.5% autopay discount not included) | From $25,000 | 5 to 20 years | Not specified |
Best home equity loan lenders of March 2024
U.S. Bank
Good for nationwide availability
U.S. Bank is the fifth largest banking institution in the US. It offers both home equity loans and HELOCs in 47 states. You can apply for a home equity loan or HELOC through an online application, by phone or in person. If you want a loan estimate for a home equity loan without completing a full application, you can get one by speaking with a banker over the phone.
- APR: From 8.40%
- Max LTV ratio: Not specified
- Max debt-to-income ratio: Not specified
- Min credit score: 660
- Loan amount: $15,000 to $750,000 (up to $1 million for California properties)
- Term lengths: Up to 30 years
- Fees: None
- Additional requirements: Subject to credit approval
- Perks: You can receive a 0.5% rate discount by enrolling in automatic payments from a U.S. Bank checking or savings account.
TD Bank
Good for price transparency
Primarily operating on the East Coast, TD Bank offers home equity loans and HELOCs in 15 states. You can apply for a TD Bank home equity loan or HELOC online, by phone or by visiting a TD Bank in person. The online application includes a calculator that will tell you the maximum amount you can borrow based on the information you input. You can also see a full breakdown of rates, fees and monthly payments. No credit check is required for this service.
- APR: From 7.99% (0.25% autopay discount included)
- Max LTV ratio: Not specified
- Max debt-to-income ratio: Not specified
- Min credit score: Not specified
- Loan amount: From $10,000
- Term lengths: Five to 30 years
- Fees: $99 origination fee at closing. Closing costs only application to loan amounts greater than $500,000.
- Additional requirements: Loan amounts less than $25,000 are available only for primary residence property use.
- Perks: You will receive a 0.25% discount if you enroll in autopay from a TD personal checking or savings account.
Connexus Credit Union
Good branch network
Connexus Credit Union operates in all 50 states, but it offers home equity loans and HELOCs in 46 states (excluding Alaska, Hawaii, Maryland and Texas). The credit union has more than 6,000 local branches. To apply for a home equity loan or HELOC with Connexus, you can fill out a three-step application online or in person. You won’t be able to see a personalized rate or product terms without a credit check.
- APR: From 7.20%
- Max LTV ratio: 90%
- Max-debt-to-income ratio: Not specified
- Min credit score: Not specified
- Loan amount: From $5,000
- Term lengths: Five to 15 years
- Fees: No annual fee. Closing costs can range from $175 to $2,000, depending on your loan terms and property location. It has returned loan payments fees of $15, convenience fees of $9.95 (for paying by debit or credit card online) and $14.95 (for paying by phone) and a forced place insurance processing fee of $12.
- Additional requirements: Because Connexus is a credit union, its products and services are only available to members. Member eligibility is open to most people: you (or a family member) just need to be a member of one of Connexus’s partner groups, reside in one of the communities or counties on Connexus’s list or become a member of the Connexus Association with a $5 donation to Connexus’s partner nonprofit.
- Perks: Flexible membership options
KeyBank
Good online application user experience
Based in Cleveland, KeyBank offers home equity loans to customers in 15 states and HELOCs to customers in 44 states. Aside from a standard home equity loan, KeyBank offers a few different HELOC options. The KeyBank application allows you to apply for multiple products at one time. If you’re not sure whether KeyBank loans are available in your area, the application will tell you once you input your ZIP code. If you’re an existing KeyBank customer, you can skim through the application and import your personal information from your account.
- APR: From 10.29% (0.25% client discount included)
- Max LTV ratio: 80% for standard home equity loans, 90% for high-value home equity loans
- Max debt-to-income ratio: Not specified
- Min credit score: Not specified
- Loan amount: From $25,000
- Term lengths: One to 30 years
- Fees: Origination fee of $295. Closing costs aren’t specified.
- Additional requirements: Borrowers must be at least 18 years of age and reside in one of the states KeyBank operates in.
- Perks: KeyBank offers a 0.25% rate discount for clients who have eligible checking and savings accounts with them.
Spring EQ
Good option for high debt-to-income ratio limits
Spring EQ was founded in 2016 and serves customers in 38 states. Spring EQ offers home equity loans and HELOCs. Spring EQ doesn’t display rates for its home lending products online — you must complete an application to see your personalized rate. The Spring EQ loan application process is simple though. Customers can see an extensive breakdown of their loan term and rate options without needing to undergo a credit check or provide their Social Security number.
- APR: Not specified
- Max LTV ratio: 90%
- Max debt-to-income ratio: 50%
- Min credit score: 640
- Loan amount: Up to $500,000
- Term lengths: Not specified
- Fees: Spring EQ loans may be subject to an origination fee of $995 and an annual fee of $99 in some states.
- Additional requirements: Spring EQ does not display rates for its home lending products online — you must complete an application to see your personalized rate.
- Perks: Spring EQ has a higher maximum DTI ratio than most other lenders — compare 50% with the typical 43% average.
Third Federal Savings & Loan
Good option for rate match guarantee
Third Federal Savings & Loan first opened in 1938. Today, the bank offers home equity loans in eight states and HELOCs in 26 states. Third Federal offers a lowest rate guarantee on its HELOCs and home equity loans, meaning Third Federal will offer you the lowest interest rate relative to other similar lenders or pay you $1,000. You can apply for a home equity loan or HELOC on the Third Federal website. You won’t have to register an account to apply, but you’re still able to save your application and return to it later.
- APR: From 7.29%
- Max LTV ratio: 80%
- Max debt-to-income ratio: Not specified
- Min credit score: Not specified
- Loan amount: $10,000 to $200,000
- Term lengths: Five to 30 years
- Fees: Home equity loans and HELOCs with Third Federal have an annual fee of $65 (waived the first year). There are no application fees, closing fees or origination fees.
- Additional requirements: Specific requirements aren’t listed.
- Perks: If you set up autopay from an existing Third Federal account, you’ll be eligible for a 0.25% rate discount.
Frost Bank
Good option for Texas borrowers
Frost Bank’s home equity loans and HELOCs are only available to Texas residents. You can apply for a home equity loan or HELOC on the Frost Bank website, but you’ll need to create an account. According to the website, the application will only take you 15 minutes.
- APR: From 7.3% (0.25% autopay discount included, only available for 2nd liens)
- Max LTV ratio: 90%
- Max debt-to-income ratio: Not specified
- Min credit score: Not specified
- Loan amount: $2,000 to $500,000
- Term lengths: 15 or 20 years
- Fees: No application fee, annual fee or closing costs. Frost Bank does charge a $15 monthly service fee, which can be waived with a Frost Plus Account.
- Additional requirements: Borrowers must reside in Texas. The bank also requires proof of homeowners insurance.
- Perks: 0.25% rate discount for clients who enroll in autopay from a Frost Bank checking or savings account. However, this feature is only available for second liens.
Regions Bank
Good rate discounts
Regions Bank is one of the nation’s largest banking, mortgage and wealth management service providers. Regions offers home equity loans and HELOCs in 15 states. You can apply for a Regions home equity loan or HELOC online, in person or over the phone. You’ll have to create an account with Regions to apply. Before you create an account, though, you can use the bank’s own rate calculator to estimate your rate and monthly payment.
- APR: From 6.75% to 14.125%(0.25% autopay discount included)
- Max LTV ratio: 89%
- Max debt-to-income ratio: Not specified
- Min credit score: Not specified
- Loan amount: $10,000 to $250,000
- Term lengths: Seven, 10, 15, 20 or 30 years
- Fees: No closing costs and no annual fees. Late fees apply for 5% of the payment amount. There is a returned check fee of $15 and an over limit fee of $29.
- Additional requirements: Not specified.
- Perks: Rate discounts between 0.25% and 0.50% to those who elect to have their monthly payments automatically debited from a Regions checking account.
Discover
Good option for no fees or closings costs
Discover is known primarily for its credit cards, but it also offers home equity loans — available in 48 states. The lender does not offer HELOCs at all. You can apply for a home equity loan from Discover online or over the phone. The application process takes approximately six to eight weeks in total, according to Discover’s website.
- APR: 6.99% for first liens, 7.99% for second liens
- Max LTV ratio: 90%
- Max debt-to-income ratio: 43%
- Min credit score: 620
- Loan amount: $35,000 to $300,000
- Term lengths: 10, 15, 20 and 30 years
- Fees: None
- Additional requirements: Specific requirements not listed.
- Perks: The lender charges no origination fees, application fees, appraisal fees or mortgage taxes.
BMO Harris
Good option for second liens
BMO Harris products and services are available in 48 states (all but New York and Texas). BMO Harris offers home equity loans and three variations of a HELOC. You can apply for a home equity loan or HELOC online or in person, but in order to get personalized rates, you’ll have to speak with a representative on the phone. Getting personalized rates doesn’t require a hard credit check.
Home equity loans from BMO Harris are only available as second liens. If you have already paid off your mortgage, a rate-lock HELOC from BMO Harris may be a better option.
- APR: From 8.84% (0.5% autopay discount not included)
- Max LTV ratio: Not specified
- Max debt-to-income ratio: Not specified
- Min credit score: 700
- Loan amount: From $5,000
- Term lengths: Five to 20 years
- Fees: There is no application fee. BMO Harris will also pay closing costs for loans secured by an owner-occupied 1-to-4-family residence. If you pay off your loan within 36 months of opening, you may be responsible for recoupment fees.
- Additional requirements: Home equity loans are only available as a second lien (meaning you can’t be mortgage free)
- Perks: If you enroll in autopay with a BMO Harris checking account, you’ll be eligible for a 0.5% rate discount.
What is a home equity loan?
A home equity loan is a fixed-rate installment loan secured by your home as a second mortgage. You’ll get a lump sum payment upfront and then repay the loan in equal monthly payments over a period of time. Because your house is used as a collateral, the lender can foreclose on it if you default on your payments.
Most lenders require you to have 15% to 20% equity in your home to secure a home equity loan. To determine how much equity you have, subtract your remaining mortgage balance from the value of your home. For example, if your home is worth $500,000 and you owe $350,000, you have $150,000 in equity. The next step is to determine your loan-to-value ratio, or LTV ratio, which is your outstanding mortgage balance divided by your home’s current value. So in this case the calculation would be:
$350,000 / $500,000 = 0.7
In this example, you have a 70% LTV ratio. Most lenders will let you borrow around 75% to 90% of your home’s value minus what you owe on your primary mortgage. Assuming a lender will let you borrow up to 90% of your home equity, you can use the formula to see how that would be:
$500,000 [current appraised value] X 0.9 [maximum equity percentage you can borrow] – $350,000 [outstanding mortgage balance] = $100,000 [what the lender will let you borrow]
A standard repayment period for a home equity loan is between five and 30 years. Under the loan, you make fixed-rate payments that never change. If interest rates go up, your loan rate remains unchanged.
Second mortgages such as home equity loans and HELOCs don’t alter a homeowner’s primary mortgage. This lets you borrow against your home’s equity without needing to exchange your primary mortgage’s rate for today’s higher rates.
Home equity loans have fixed interest rates, which is a positive if you’re looking for predictable monthly payments. The rate you lock in when you take out your loan will be constant for the entire term, even if market interest rates rise.
Reasons to get a home equity loan
A home equity loan is a good choice if you need a large sum of cash all at once. You can use that cash for anything you’d like — it doesn’t have to be home-related.However, some uses make more sense than others.
- Home renovations and improvements: If you want to upgrade your kitchen, install solar panels or add on a second bathroom, you can use the money from a home equity loan to pay for the cost of these renovations. Then, at tax time, you can deduct the interest you pay on the loan — as long as the renovations increase the value of your home and you meet certain IRS criteria.
- Consolidating high-interest debt: Debt consolidation is a strategy where you take out one large loan to pay off the balances on multiple smaller loans, typically done to streamline your finances or get a lower interest rate. Because home equity loan interest rates are typically lower than those of credit cards, they can be a great option to consolidate your high-interest credit card debt, letting you pay off debt faster and save money on interest in the long run. The only downside? Credit card and personal loan lenders can’t take your home from you if you stop making your payments, but home equity lenders can.
- College tuition: Instead of using student loans to cover the cost of college for yourself or a loved one, you can use the cash from a home equity loan. If you qualify for federal student loans, though, they’re almost always a better option than a home equity loan. Federal loans have better borrower protections and offer more flexible repayment options in the event of financial hardship. But if you’ve maxed out your financial aid and federal student loans, a home equity loan can be a viable option to cover the difference.
- Medical expenses: You can avoid putting unexpected medical expenses on a credit card by tapping into your home equity before a major medical procedure. Or, if you have outstanding medical bills, you can pay them off with the funds from a home equity loan. Before you do this, it’s worth asking if you can negotiate a payment plan directly with your medical provider.
- Business expenses: If you want to start a small business or side hustle but lack money to get it going, a home equity loan can provide the funding without many hoops to jump through. However, you may find that dedicated small business loans are a better, less risky option.
- Down payment on a second home: Homeowners can leverage their home’s equity to fund a down payment on a second home or investment property. But you should only use a home equity loan to buy a second home if you can comfortably afford multiple mortgage payments over the long term.
Experts don’t recommend using a home equity loan for discretionary expenses like a vacation or wedding. Instead, try saving up money in advance for these expenses so you can pay for them without taking on unnecessary debt.
Pros
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One lump sum payment of total loan up front.
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Fixed interest rate, meaning you won’t have to worry about your rate rising over the repayment period.
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Typically lower interest rate than credit cards or personal loans.
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Little to no restrictions on what you can use the money for.
Cons
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Your home is used as collateral, meaning it can be taken from you if you default on the loan.
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If you’re still paying off your mortgage, this loan payment will be on top of that.
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Home equity loans can come with closing costs and other fees.
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May be hard to qualify for if you don’t have enough equity.
Home equity loan vs. HELOC
Home equity loans and HELOCs are similar but have a few key distinctions. Both let you draw on your home’s equity and require you to use your home as collateral to secure your loan. The two major differences are the way you receive the money and how you pay it back.
A home equity loan gives you the money all at once as a lump sum, whereas a HELOC lets you take money out in installments over a long period of time, typically 10 years. Home equity loans have fixed-rate payments that will never go up, but most HELOCs have variable interest rates that rise and fall with the prime rate.
A home equity loan is better if:
- You want a fixed-rate payment: Your monthly payment will never change even if interest rates rise.
- You want one lump sum of money: You receive the entire loan upfront with a home equity loan.
- You know the exact amount of money you need: If you know the amount you need and don’t expect it to change, a home equity loan likely makes more sense than a HELOC.
A HELOC is better if:
- You need money over a long period of time: You can take the money as you need it and only pay interest on the amounts you withdraw, not the full loan amount, as is the case with a home equity loan.
- You want a low introductory interest rate: Although HELOC rates may increase over time, they also typically offer lower introductory interest rates than home equity loans. So you could save money on interest charges.
Home equity loans vs. cash-out refinances
A cash-out refinance is when you replace your existing mortgage with a new mortgage, typically to secure a lower interest rate and more favorable terms. Unlike a traditional refinance, though, you take out a new mortgage for the home’s entire value — not just the amount you owe on your mortgage. You then receive the equity you’ve already paid off in your home as a cash payout.
For example, if your home is worth $450,000, and you owe $250,000 on your loan, you would refinance for the entire $450,000, rather than the amount you owe on your mortgage. Your new cash-out refinance home loan would replace your existing mortgage and then offer you a portion of the equity you built (in this case $200,000) as a cash payout.
Both a cash-out refi and a home equity loan will provide you with a lump sum of cash that you’ll repay in fixed amounts over a specific time period, but they have some important differences. A cash-out refinance replaces your current mortgage payment. When you receive a lump sum of cash from a cash-out refi, it’s added back onto the balance of your new mortgage, usually causing your monthly payment to increase. A home equity loan is different — it doesn’t replace your existing mortgage and instead adds an additional monthly payment to your expenses.
Who qualifies for a home equity loan?
Although it varies by lender, to qualify for a home equity loan, you’re typically required to meet the following criteria:
- At least 15% to 20% equity built up in your home: Home equity is the amount of home you own, based on how much you’ve paid toward your mortgage. Subtract what you owe on your mortgage and other loans from the current appraised value of your house to figure out your home equity number.
- Adequate, verifiable income and stable employment: Proof of income is a standard requirement to qualify for a HELOC. Check your lender’s website to see what forms and paperwork you will need to submit along with your application.
- A minimum credit score of 620: Lenders use your credit score to determine the likelihood that you’ll repay the loan on time. Having a strong credit score — at least 700 — will help you qualify for a lower interest rate and more amenable loan terms.
- A debt-to-income ratio of 43% or less: Divide your total monthly debts by your gross monthly income to get your DTI. Like your credit score, your DTI helps lenders determine your capacity to make consistent payments toward your loan. Some lenders prefer a DTI of 36% or less.
A home equity loan is better if:
- You don’t want to pay private mortgage insurance: Some cash-out refinances require PMI, which can add hundreds of dollars to your payments, but home equity loans don’t.
- You can’t complete a refinance: With rates rising, it’s possible that your mortgage rate is lower than current refinance rates. If that’s the case, it likely won’t make financial sense for you to refinance. Instead, you can use a home equity loan to take out only the money you need, rather than replacing your entire mortgage with a higher interest rate loan.
A cash-out refinance is better if:
- Refinance rates are lower than your current mortgage rate: If you can secure a lower interest rate by refinancing, this could save you money in interest, while providing access to a lump sum of cash.
- You want only one monthly payment: The amount you borrow gets added back to the balance of your mortgage so you make only one payment to your lender every month.
- Less stringent eligibility requirements: If you don’t have great credit or you have a high debt-to-income ratio, or DTI, you may have an easier time qualifying for a cash-out refi compared with a home equity loan.
- Lower interest rates: Cash-out refinances sometimes offer more favorable interest rates than home equity loans.
Tips for choosing a lender
You’ll want to consider what type of financial institution best suits your needs. In addition to mortgage lenders, financial institutions that offer home equity loans include banks, credit unions and online-only lenders.
“Select a lender that makes you feel comfortable and informed with the home equity loan process,” said Rob Cook, vice president of marketing, digital and analytics for Discover Home Loans. “Look at what tools a lender makes available to borrowers to help inform their decision. For many borrowers, being able to apply and manage their application online is important.”
One option is to work with the lender that originated your first mortgage as you already have a relationship and a history of on-time payments. Many banks and credit unions also offer discounted rates and other benefits when you become a customer.
Some lenders offer lower interest rates but charge higher fees (and vice versa). What matters most is your annual percentage rate because it reflects both interest rate and fees.
Ensure the specific terms of the loan your lender is offering make sense for your budget. For example, be sure the minimum loan amount isn’t too high — be wary of withdrawing more funds than you need. You also want to make sure that your repayment term is long enough for you to comfortably afford the monthly payments. The shorter your loan term, the higher your monthly payments will be.
“Costs and fees are an important consideration for anyone who is looking for a loan,” Cook said. “Homeowners should understand any upfront or ongoing fees applicable to their loan options. Also look for prepayment penalties that might be associated with paying off your loan early.”
No matter what, it’s important to talk to numerous lenders and find the best rate available.
How to apply for a home equity loan
Applying for a home equity loan is similar to applying for any mortgage loan. You’ll need both a solid credit score and proof of enough income to repay your loan.
1. Interview multiple lenders to determine which lender can offer you the lowest rates and fees. The more companies you speak with, the better your chances of finding the most favorable terms.
2. Have at least 15% to 20% equity in your home. If you do, lenders will then take into account your credit score, income and current DTI to determine whether you qualify as well as your interest rate.
3. Be prepared to have financial documents at the ready, such as pay stubs and Form W-2s. Proof of ownership and the appraised value of your home will also be necessary.
4. Close on your loan. Once you submit your application, the final step is closing on your loan. In some states, you’ll have to do this in person at a physical branch.
FAQs
As of March 27, average home equity loan rates are 8.73% for a $30,000 10-year home equity loan and 8.70% for a $30,000 15-year home equity loan — higher than the average rate for a 30-year fixed rate mortgage, which is currently 7.01%. Both home equity rates and mortgage rates started off at historic lows at around 3% at the beginning of 2022 and have been consistently climbing in response to the Federal Reserve aggressively raising the benchmark interest rate.
Most lenders will allow you to borrow anywhere from 15% to 20% of your home’s available equity. To calculate your home equity, subtract your remaining mortgage balance from the current appraised value of your home. How much equity a bank or lender will let you take out depends on a number of additional factors such as your credit score, income and DTI ratio. For most homeowners, it can take five to 10 years of mortgage payments to build up enough tappable equity to borrow against.
A home equity loan can affect your score positively or negatively depending on how responsibly you use it. As with any loan, if you miss or make late payments, your credit score will drop. The amount by which it will drop depends on such factors as whether you’ve made late payments before. However, HELOCs are secured loans that are backed by your property, so they tend to affect your credit score less because they’re treated more like a car loan or mortgage by credit-scoring algorithms.
Lenders are currently offering rates that start as low as 5% to 6% for borrowers with good credit, but rates can vary depending on your personal financial situation. A lender will base your interest rate on how much equity you have in your home, your credit score, income level and other aspects of your financial life such as your DTI ratio, which is calculated by dividing your monthly debts by your gross monthly income.
Home equity loans can be used for anything you choose to spend the money on. Typical life expenses that people usually take out home equity loans for are to cover expenditures such as home renovations, higher education costs like tuition or to pay off high-interest charges like credit card debt. There’s a bonus for using your loan for home improvements and renovations: the interest is tax deductible.
You can also use a home equity loan in the event of an emergency like unplanned medical expenses. Whatever you chose to use your loan for, keep in mind that taking out a large sum of money that accrues interest is an expensive choice to carefully consider, especially because you’re using your home as collateral to secure the loan. If you can’t pay back the loan, the lender can seize your home to repay your debt.
Methodology
We evaluated a range of lenders based on factors such as interest rates, APRs and fees, how long the draw and repayment periods are, and what types and variety of loans are offered. We also took into account factors that impact the user experience such as how easy it is to apply for a loan online and whether physical lender locations exist.
Source: cnet.com
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Today’s average refinance rates
Current mortgage refinance rates
Refinance rates are still high, but your personal interest rate will depend on your credit history, financial profile and application.
Average refinance rates reported by lenders across the US as of March 28, 2024. We track refinance rate trends using information from Bankrate.
Mortgage refinance rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
Refinance rate news
A vast majority of US homeowners already have mortgages with a rate below 6%. Because mortgage refinance rates have been averaging above 6.5% over the past several months, households are choosing to hold on to their existing mortgages instead of swapping them out with a new home loan.
If rates fell to 6%, at least a third of borrowers who took out mortgages in 2023 could reduce their rate by a full percentage point through a refinance, according to BlackKnight.
Refinancing in today’s market could make sense if you have a rate above 8%, said Logan Mohtashami, lead analyst at HousingWire. “However, with all refinancing options, it’s a personal financial choice because of the cost that goes with the loan process,” he said.
Where refinance rates are headed in 2024
Mortgage rates have been sky-high over the last two years, largely as a result of the Federal Reserve’s aggressive attempt to tame inflation by spiking interest rates. Experts say that decelerating inflation and the Fed’s projected interest rate cuts should help stabilize mortgage interest rates by the end of 2024. But the timing of Fed cuts will depend on incoming economic data and the response of the market.
For homeowners looking to refinance, remember that you can’t time the economy: Interest rates fluctuate on an hourly, daily and weekly basis, and are influenced by an array of factors. Your best move is to keep an eye on day-to-day rate changes and have a game plan on how to capitalize on a big enough percentage drop, said Matt Graham of Mortgage News Daily.
What does it mean to refinance?
When you refinance your mortgage, you take out another home loan that pays off your initial mortgage. With a traditional refinance, your new home loan will have a different term and/or interest rate. With a cash-out refinance, you’ll tap into your equity with a new loan that’s bigger than your existing mortgage balance, allowing you to pocket the difference in cash.
Refinancing can be a great financial move if you score a low rate or can pay off your home loan in less time, but consider whether it’s the right choice for you. Reducing your interest rate by 1% or more is an incentive to refinance, allowing you to cut your monthly payment significantly.
How to choose the right refinance type and term
The rates advertised online often require specific conditions for eligibility. Your personal interest rate will be influenced by market conditions as well as your specific credit history, financial profile and application. Having a high credit score, a low credit utilization ratio and a history of consistent and on-time payments will generally help you get the best interest rates.
30-year fixed-rate refinance
The average rate for a 30-year fixed refinance loan is currently 6.88%, a decrease of 14 basis points from what we saw one week ago. (A basis point is equivalent to 0.01%.) A 30-year fixed refinance will typically have lower monthly payments than a 15-year or 10-year refinance, but it will take you longer to pay off and typically cost you more in interest over the long term.
15-year fixed-rate refinance
For 15-year fixed refinances, the average rate is currently at 6.39%, a decrease of 9 basis points from what we saw the previous week. Though a 15-year fixed refinance will most likely raise your monthly payment compared to a 30-year loan, you’ll save more money over time because you’re paying off your loan quicker. Also, 15-year refinance rates are typically lower than 30-year refinance rates, which will help you save more in the long run.
10-year fixed-rate refinance
The average rate for a 10-year fixed refinance loan is currently 6.27%, a decrease of 11 basis points compared to one week ago. A 10-year refinance typically has the lowest interest rate but the highest monthly payment of all refinance terms. A 10-year refinance can help you pay off your house much quicker and save on interest, but make sure you can afford the steeper monthly payment.
To get the best refinance rates, make your application as strong as possible by getting your finances in order, using credit responsibly and monitoring your credit regularly. And don’t forget to speak with multiple lenders and shop around.
When to consider a mortgage refinance
Homeowners usually refinance to save money, but there are other reasons to do so. Here are the most common reasons homeowners refinance:
- To get a lower interest rate: If you can secure a rate that’s at least 1% lower than the one on your current mortgage, it could make sense to refinance.
- To switch the type of mortgage: If you have an adjustable-rate mortgage and want greater security, you could refinance to a fixed-rate mortgage.
- To eliminate mortgage insurance: If you have an FHA loan that requires mortgage insurance, you can refinance to a conventional loan once you have 20% equity.
- To change the length of a loan term: Refinancing to a longer loan term could lower your monthly payment. Refinancing to a shorter term will save you interest in the long run.
- To tap into your equity through a cash-out refinance: If you replace your mortgage with a larger loan, you can receive the difference in cash to cover a large expense.
- To take someone off the mortgage: In case of divorce, you can apply for a new home loan in just your name and use the funds to pay off your existing mortgage.
Source: cnet.com
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There’s no question that inflation has cooled significantly compared to mid-2022 when the inflation rate hovered above 9%. However, we aren’t back to normal just yet. At 3.2%, today’s inflation rate is still well above the Fed’s target rate of 2%, resulting in the Federal Reserve’s benchmark rate remaining paused at a 23-year high. In turn, borrowers now face elevated interest rates on everything from credit cards to mortgage loans — especially compared to the rates that were offered in 2020 and 2021.
But the good news is that mortgage rates, in particular, have declined slightly over the last few months, making it more affordable to borrow money for a home. And, as the spring homebuying season kicks into high gear, many prospective buyers are starting the pre-approval process to secure a mortgage loan.
Finding the right mortgage loan goes beyond just getting the best mortgage rate, though. It’s also critical that you understand all the details, fees and requirements from your lender so you can make the best decision possible for your money. And that starts by asking some important questions.
Explore your top mortgage loan options online now.
10 important mortgage loan questions to ask this spring
If you want to make an informed decision on your mortgage loan this spring, here are 10 crucial questions you should ask your mortgage lender:
What are the current mortgage rates and fees?
It’s crucial to get a clear picture of the interest rate you qualify for and understand all the lender fees involved in the transaction. As part of this process, be sure to ask about the mortgage loan’s annual percentage rate (APR), which includes the interest rate plus other costs. And, given that today’s mortgage rates are hovering near 7%, don’t forget to inquire about discount points to buy down the rate.
Find the best mortgage loan rates you could qualify for today.
What are the different loan program options?
There are various mortgage products to choose from. For example, your lender may offer you conventional or jumbo mortgage loan options as well as government-backed mortgage loans, like Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA) and U.S. Department of Veterans Affairs (VA) loans.
Each type of mortgage loan has pros and cons to consider, and your lender should explain the differences and qualifications for each. That way, you can choose the right fit based on your down payment amount, credit score and financial situation.
What is the required down payment minimum?
Down payment requirements can vary across mortgage loan programs, and depending on the amount of money you have to put down on the home, one mortgage loan could make more sense over another. So, be sure to find the minimum down payment percentages for each type of loan you’re considering, as well as the benefits of putting down a higher amount to avoid mortgage insurance.
You may also want to ask if you’re eligible for any down payment assistance programs, as these programs may be available for certain types of buyers or mortgage loans.
How much home can I afford?
Your lender will pre-approve you for a maximum mortgage loan amount based on your income, debts and credit. However, it’s important to understand that the amount you’re approved for is the maximum, and you need to know what monthly payment you can realistically afford.
With that in mind, be sure to ask your lender to run different home price scenarios with estimated payments to ensure that you’re comfortable with the potential costs each month and that they align with what you have budgeted for your mortgage payments.
What documentation is required?
Your lender will need various documentation, from tax returns and pay stubs to bank statements and gift letters, to verify your income, assets and other information that’s required to approve you for your mortgage loan. It can be helpful to get a full checklist of required paperwork so you can prepare in advance, helping to expedite the pre-approval process (and ultimately the loan approval process).
How long is the mortgage pre-approval valid?
Pre-approvals typically have an expiration date, which can vary by lender, but are often between 60 and 90 days. Ask your lender how long your mortgage loan preapproval is valid for and find out what the process is to get re-approved if your home search takes longer just in case there are issues with finding the right home in that time frame.
What are the estimated closing costs?
In addition to your down payment, you’ll need to pay closing costs, which can vary by lender, but typically amount to 2% to 5% of the home’s purchase price. Be sure to request a fee worksheet or estimate from your lender to understand this significant upfront expense.
And, in some cases, you may be able to negotiate with your lender to lower some of these closing costs and fees. Knowing what these costs are as you compare your loan and lender options can be useful as you determine whether it would be worth it to do so.
What is the rate lock period?
A mortgage rate lock guarantees that your quoted interest rate won’t increase for a set period, which is often between 30 and 60 days. As you navigate the mortgage lending process, be sure to find out the lender’s lock periods and associated fees in case you need an extended rate lock.
What are the steps after pre-approval?
Having clarity on the next steps after pre-approval is an important component of ensuring the mortgage lending process is a success. So, be sure to ask your lender about the typical timeline for what happens after pre-approval. That way you know how long you have to shop for homes, the timeline for having a home under contract, when you need to secure the appraisal and the estimated time it will take for the underwriting processes to get the final approval.
Are there any prepayment penalties?
These days, it’s rare for lenders to charge mortgage prepayment penalties. However, it’s still important to confirm there are no fees if you pay off your loan early or refinance down the road, so be sure to ask this question of your lender.
The bottom line
The mortgage process can be daunting, especially in today’s high-rate environment, but being an informed borrower is half the battle. So, as you navigate the mortgage lending process, don’t hesitate to ask your lender plenty of questions, as this will likely be one of the biggest financial decisions you’ll make. That’s why an experienced, communicative lender is key to making the right mortgage choice this spring homebuying season.
Source: cbsnews.com
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If you are offered a relatively low mortgage rate, locking it in can secure it and potentially save you a bundle of money over the life of your loan. In other words, it can be a smart move.
That said, when applying for a mortgage, you only have so much control over the mortgage rate, as lenders will consider your credit score, income, and assets to determine your risk as a borrower. What’s more, mortgage rates change daily based on external economic factors like investment activity and inflation.
Read on to learn how a mortgage rate lock works and the benefits and downsides of using this option.
What Is a Mortgage Rate Lock?
A mortgage rate lock is an agreement between a borrower and lender to secure an interest rate on a mortgage for a set period of time. Locking in your mortgage rate safeguards you from market fluctuations while the lender underwrites and processes your loan.
Interest rates can rise and fall significantly between mortgage preapproval and closing on a property.
Remember that in the home-buying process, when you’re pre-approved for a mortgage, you will know exactly how much you most likely can borrow, and then you can shop for a home in that range.
So when can you lock in a mortgage rate? Depending on the lender, you may have the option to lock in the rate any time between preapproval and when underwriting begins.
Before preapproval and locking in, it’s recommended to get multiple offers when shopping for a mortgage to find a competitive rate.
💡 Quick Tip: Want the comforts of home and to feel comfortable with your home loan? SoFi has a simple online application and a team dedicated to closing your loan on time. No surprise SoFi has been named a Top Online Lender in 2024 by LendingTree/Newsweek.
How a Mortgage Rate Lock Works
Mortgage rate locks are more complicated than simply securing a set rate in perpetuity. How the rate lock works in practice will vary among lenders, loan terms, different types of mortgages, and geographic locations.
Once you lock a mortgage rate, there are three possible scenarios: Interest rates will increase, decrease, or stay the same. The ideal outcome is securing a lower rate than the prevailing market interest rate at the time of closing.
Here are some key points to know if you are considering a rate lock:
• Rate locks are sometimes free but often cost between 0.25% and 0.50% of the loan amount.
• When you choose to lock in your rate, it’s stabilized for a set period of time — usually for 30 to 60 days, but up to 120 days may be available.
• If the rate lock expires before closing on the property, the ability to extend is subject to the lender.
• Time it right. The average mortgage took 44 days to close as of February 2024, according to ICE Mortgage Technology, underscoring the importance of timing a mortgage rate lock with your expected closing date. Otherwise, you could face fees for extending the rate lock or have to settle for a new, potentially higher rate.
• Whether borrowers are charged for a rate lock depends on the lender. It could be baked into the cost of the offer or tacked on as a flat fee or percentage of the loan amount. The longer the lock period, the higher the fees, generally speaking.
• Lenders have the discretion to void the rate lock and change your rate based on your personal financial situation. Say you take out a new line of credit to cover an emergency expense during the mortgage underwriting process. This could affect your credit and debt-to-income ratio, causing the lender to reevaluate your eligibility for the offered rate and financing.
• Lenders also determine the mortgage rate based on the types of houses a borrower is looking at: A primary residence vs. a vacation home or investment property, for example, would influence the interest rate.
Recommended: A Guide to Buying a Duplex
Consequences of Not Locking in Your Mortgage Rate
There are risks to not locking in a mortgage rate before closing.
If you don’t lock in a rate, it can change at any time. An uptick in interest rates would translate to a higher monthly mortgage payment. Granted, a slight bump to your monthly payment may not lead to mortgage relief, but it could cost thousands over time.
Example: The monthly payment on a $300,000 loan at a 30-year fixed rate would go up by $88 if the interest rate increased from 4% to 4.5%. This would add up to an extra $31,611 in interest paid over the life of the loan.
You can use a mortgage calculator tool to see how much a rise in rates could affect your mortgage payment.
Furthermore, a higher monthly payment might potentially disqualify you from financing, depending on the impact on your debt-to-income ratio. After a jump in interest rates, borrowers may need to make a larger down payment or buy mortgage points upfront to obtain financing.
Even if you lock in a mortgage rate early on, you could face these consequences if it expires before closing. Deciding when to lock in a mortgage rate should account for any potential contingencies that could delay the process.
If you’re unsure, ask your lender for guidance on when you should lock in.
💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.
What to Do if Interest Rates Fall After Your Rate Lock
The main concern with mortgage rate locks is that you could miss out on a lower rate. In most cases, buyers will pay the rate they are locked in at if the prevailing interest rate is less.
A float-down option, however, protects you from rate increases while letting you switch to the lower interest rate at closing.
• Float-down policies vary by lender but generally cost more than a conventional rate lock for the added flexibility and assurance.
• It’s also possible that a float-down option won’t be triggered unless a certain threshold is met for the drop in rates.
• It’s worth noting that borrowers aren’t committed to the mortgage lender until closing, so reapplying elsewhere is an option if rates change considerably.
Pros and Cons of Mortgage Rate Lock
Back to the big question: Should I lock my mortgage rate today? It’s important to weigh the pros and cons to decide when to lock in a mortgage rate.
Pros | Cons |
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Locking in a rate you can afford can lessen money stress during the closing process | A rate lock might prevent you from getting a better deal if rates fall later on |
You could save money on interest if you lock in before rates go up | If a rate lock expires, you may have to pay for an extension or get stuck with a potentially higher rate |
Lenders may offer a short-term rate lock for free, providing a window to close the deal if rates spike but an opportunity to wait it out if they drop | Rate locks can involve a fee of 0.25% to 0.50% of the loan amount. |
The Takeaway
A favorable interest rate can make a difference in your home-buying budget. If you’re considering a rate lock because you’re concerned that rates will be rising, it’s important to choose a lock period that gives the lender ample time to process the loan to avoid extra fees or a potentially higher rate.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
How long does a rate lock period last?
Rate locks usually last 30 to 60 days but can be shorter or longer depending on the agreement. It’s not uncommon for lenders to offer a free rate lock for a designated time frame.
Should you use a mortgage rate “float-down”?
If you’re worried about missing out on low interest rates, a mortgage rate float-down option could let you secure the current rate with the option to take a lower one if rates drop. Take note that these agreements usually outline a specified period and minimum amount the rate must drop to activate the float-down.
How much does a rate lock cost?
Lenders don’t always charge for a rate lock. If they do, you can expect costs to range from 0.25% to 0.50% of the loan amount for a lock period (usually 30 to 60 days). A longer lock period or adding a float-down option typically increases the rate lock cost.
What happens if my rate lock expires?
If your rate lock expires before you’ve finalized the deal, you can choose to extend the lock period (usually for a fee) or take the prevailing rate when you close on the loan.
Photo credit: iStock/Vertigo3d
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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Source: sofi.com
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Generally, it helps to save up to 20-25% of a house’s sales price. However, factors like geographical location, economic climate, real estate interest rates, and global events will influence how much money you’ll need to buy a house.
Key Takeaways:
- An ideal down payment is 20% to 25% of a home’s value.
- USDA and VA home loans traditionally don’t require down payments.
- If you make a down payment below 20%, you may be required to get private mortgage insurance.
How much money do you need to buy a house? That cost depends on numerous factors like inflation and real estate trends. According to the Census, homes sold for a median price of $420,700 in January 2024.
Thankfully, you don’t need to pay off that amount all at once. A down payment that’s 20% to 25% of a home’s value can help you secure a property. Even if you don’t have the funds to make a sizeable down payment, low and no-down-payment mortgage options are available.
Below, we’ll share our expertise to help you learn all about loans and mortgage options. We’ll also answer several common questions and share helpful tools, like Credit.com’s mortgage calculator.
All Costs Associated with Buying a House
Spend enough time shopping around for houses, and you’ll learn very quickly that a property’s sales price isn’t the only expense you’ll have to pay. Below, we’ll cover down payments, earnest money deposits, and other factors that determine the real cost of a home.
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Down Payments for Different Mortgage Options
According to the United States Census Bureau, 661,000 new homes were sold in January 2023. Most homebuyers don’t pay off their properties in full from the get-go. Instead, they cover a portion of the home’s cost with a down payment, then gradually pay off the remaining value via monthly mortgage payments.
“How do home mortgage rates work?” and “What types of mortgages am I eligible for?” are common questions for first-time homebuyers.
Below, we’ll discuss four mortgage options and break down how each of them works.
1. Conventional Mortgage
A conventional loan is a mortgage option that’s offered by a private lender instead of the government. Mortgage companies, credit unions, and banks offer conventional loans, though they might require a down payment between 20% and 25% of a property’s sales price.
Lenders might request that you purchase private mortgage insurance (PMI) if your down payment is less than 20%. PMI reimburses lenders if you don’t make your mortgage payments, and borrowers will have to pay for coverage annually.
2. USDA Mortgage
The United States Department of Agriculture (USDA) offers this unique mortgage to borrowers who live in rural areas. A USDA mortgage has no down payment requirement, and its interest rate is very competitive.
To qualify for a USDA loan, you need to:
- Buy an eligible property. Your potential home has to be in an eligible rural area.
- Meet income guidelines. To qualify for a USDA loan, your income can’t exceed a state-specific amount.
- Use the home as your primary dwelling. You have to live on the property permanently.
- Be a U.S. citizen, a U.S. national, or a qualifying resident alien. Foreign nationals not authorized to remain in the United States can’t get USDA loans.
You’ll also need to meet the lender’s credit requirements. On average, a credit score of 620 or more will qualify you for a government-backed USDA loan.
3. FHA Mortgage
The Federal Housing Administration (FHA) offers this distinct government-backed mortgage. Borrowers can secure an FHA mortgage with a down payment as low as 3.5%.
Borrowers with very low credit scores might be eligible for an FHA loan, at the expense of having more strict loan limits and higher up-front costs.
To get an FHA loan, you need to meet the following requirements:
- Primary residence. The house associated with your loan must be your primary residence. You can’t rent it out to others for profit.
- FHA maximum limit. FHA loans can only apply to properties within a set price range. In 2024, the maximum FHA loan amount is $498,257 for single-family homes.
- Debt-to-income ratio. To qualify for an FHA loan, you must spend a maximum of 43% of your income on housing costs and housing-related debt.
4. VA Home Loans
Veterans Affairs (VA) loans offer low credit requirements and come with no down payment restrictions.
Certain people qualify for VA loans, including:
- Service members who’ve served for at least 90 days consecutively.
- Veterans who’ve served at least 181 continuous days, depending on their deployment date.
- National Guard members with six years of Active Reserve status or 90 consecutive days of active duty service.
- Surviving spouses of veterans, including veterans who are missing in action or being held as a prisoner of war (POW).
Earnest Money Deposit
An earnest money deposit is a payment that buyers can place to demonstrate how serious they are about obtaining a property. Earnest money deposits are normally between 1% and 3% of a property’s sales price. This deposit is not the same as a down payment.
When you make an earnest money deposit, those funds are put into an escrow account. If the seller of a property closes on a deal with you, your earnest money deposit is then added to your down payment. If the seller doesn’t close on the deal with you, it’s possible to regain your earnest money deposit if contingencies are set in place.
Several common contingencies include:
- Home inspection contingency: Buyers request to have an inspection conducted on a property. If problems are discovered, buyers can back out of a deal.
- Home sale contingency: Buyers who might need to sell their current home can ask for extra time.
- Insurance contingency: This is for buyers who may need time to obtain home insurance for a property.
Closing Costs
Closing costs include taxes, appraisals, home inspection costs, title costs, and attorney fees. They’re generally between 3% and 6% of your mortgage principal. Your mortgage principal is the amount you borrow—so the bigger your down payment, the less you’ll pay in closing costs.
Let’s use the $200,000 home above as an example. Consider these three 4% closing cost scenarios:
- Your down payment is 10%, or $20,000, leaving a mortgage principal of $180,000. Your closing costs will roughly amount to $7,200.
- You offer 20%, or $40,000, as your down payment. Your mortgage principal is $160,000, and you’ll pay $6,400 in closing costs.
- You apply for a mortgage with no down payment, so your mortgage principal is $200,000. Ultimately, you’ll pay $8,000 in closing costs.
Home-Buying Examples
Next, we’ll show you how to determine your down payment on a home with the previous loans as examples. Let’s imagine your dream home is on the market for $200,000.
- Down payments for conventional mortgages are usually $10,000 – $40,000.
- USDA mortgages normally don’t require down payments.
- An FHA mortgage can cost as little as $7,000.
- A VA home loan also doesn’t require a down payment.
USDA and VA home loan mortgage options have the lowest up-front costs for eligible borrowers. An FHA mortgage is less costly than a conventional loan, but interest rates will affect your total payments in the long term.
Financial Resource Ideas
Making a down payment can be challenging because you need a paper trail of your purchases. In most cases, you can’t use borrowed money for a down payment.
Conversely, we know several creative ways to come up with a down payment:
- Profits earned from stock or bond sales
- Filing for an IRA or 401(k) withdrawal
- Paying with money from your checking or savings account
- Cash earned from a money market account
- Using funds from your retirement account
- Monetary gifts
You can roll other funds, like your tax return or a security deposit refund, into your down payment, too.
How Much Money Should I Save Before Buying a House?
It’s important to look at the big picture when buying a house. You’ll need to pull together a down payment and closing costs, but you’ll also need to budget for removal costs, inspections, and repair fees.
A tool like a monthly budget template can put your common expenses into perspective and help you better understand how much house you can afford with your current income.
When Should I Seek Mortgage Relief?
“What happens if I miss a mortgage payment?” is another concern for new and long-time homeowners. First, know that your home won’t immediately be foreclosed on if you miss a payment. Foreclosure usually isn’t imminent unless you’ve missed two or three payments.
If your mortgage payments aren’t within reach, you can contact your lender and explain your specific situation. Seeking forbearance, which is a temporary pause on your payments, can also help you regain your bearings.
Prepare to Buy a Home with Credit.com
Knowing your credit score and understanding the elements that affect it can help you know what you need to do to prepare for loan opportunities.
Sign up for Credit.com’s ExtraCredit® subscription to check out 28 of your FICO® scores. Afterward, visit our mortgage rates page to get additional information.
Source: credit.com
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Having a list of mortgage questions to ask potential lenders is just the start. Knowing the answers you’re looking for puts you ahead of the game.
1. Which type of mortgage is best for me?
This question will help you determine whether you’re talking to a salesperson or a quality advisor. When you ask, “What are my options?” for each type of loan discussed, the mortgage lender should tell you the pros and the cons in light of your situation.
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2. How much down payment will I need?
A 20% down payment is every lender’s ideal, but it’s not always required. Qualified buyers can find mortgages with as little as 3% down, or even no down payment. Again, there are considerations for every down payment option. The best lenders will take the time to walk you through the choices.
3. Do I qualify for any down payment assistance programs?
If you’re interested in local, state and national down payment assistance programs, lenders with knowledge of them — and the wherewithal to help you navigate the process — are well worth the hunt.
4. What is my interest rate?
You probably already planned to ask this mortgage question. It’s the one benchmark we all understand. Or do we? Lenders can move the needle on your mortgage interest rate a number of ways, most of them involving additional fees.
But after talking to at least a couple of lenders, you’ll get an idea of a ballpark interest rate you’ll qualify for. Let’s say it’s 6%. We’ll call that your payment interest rate because that’s what your monthly mortgage payment will be based on.
Knowing that, you’ll move on to the next — and very important — question, about the annual percentage rate, or APR.
By the way, if you’re considering an adjustable-rate mortgage rather than a fixed-rate loan, you’ll want to ask: How often is the payment interest rate adjusted? What is the maximum annual adjustment? What is the highest cap on the rate?
5. What is the annual percentage rate?
Now that you have an idea of what your payment rate will be, it’s time to find out what your annual percentage rate is. The difference between the two? The APR incorporates all of the embedded fees of the loan.
Ask your lender if any discount points are included in your APR. To make an apples-to-apples comparison among lenders, the answer you’re looking for is “No.” You can always decide later to buy discount points, which are extra fees you pay upfront to lower your interest rate.
When you have zero-discount-point APRs from competing lenders, you can see who has the lowest fees for the same payment rate.
In our example of receiving a 6% payment rate, you’re looking for the lowest APR based on that payment rate. Maybe one lender offers you a 6.25% APR, and another a 6.5% APR. The 6.25% APR lender is charging you fewer fees.
A higher APR isn’t always a bad thing.
Say you’re buying your “forever home.” If you buy discount points to lower your payment rate, you’ll have a higher APR. But after some years, you’ll make up for the additional fees by paying less in interest thanks to that lower payment rate.
6. Are you doing a hard credit check on me today?
It’s always good to know when the lender is going to perform a “hard” credit check, called a “hard inquiry.” That type of payment history inquiry shows up on your credit report. Lenders need to do this to give you a firm interest rate quote.
When you’re shopping more than one lender, you’ll want these hard credit pulls to occur within a short period of time — say within a few weeks or so — to minimize the impact on your credit score.
7. Do you charge for an interest rate lock?
Once you’ve decided on a lender, you may want to lock in your interest rate. This ensures that it doesn’t go up — though it won’t go down, either.
Some lenders charge a fee to lock in your rate. Others don’t — but the cost might be rolled into your interest rate and other lender fees. The answer you’re looking for on a typical home loan (not a construction loan) is: There’s no charge for an interest rate lock.
8. Will I have to pay mortgage insurance?
If you put down less than 20% on a conventional loan, the answer will probably be “Yes.” Mortgage insurance on government-backed loans works differently. For example, read more about FHA mortgage insurance.
Even if the mortgage insurance is “lender paid,” it’s likely passed on as a cost built into your mortgage payment, which increases your rate and monthly payment. You’ll want to know just how much mortgage insurance will cost and if it’s an upfront or ongoing charge, or both.
Then, ask the lender what your options are. The answer may be just, “Make a bigger down payment.”
Or you may find there are other loan programs that you might qualify for that don’t require mortgage insurance.
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9. What will my monthly payment be?
You’ve probably asked this question already. But knowing what your monthly mortgage payment will be is kind of key to the whole deal, right? You’ll also want to ask if there is any prepayment penalty if you pay off the mortgage early — for instance, if you sell your home or refinance. The answer should be “No.”
10. Do you have an origination fee?
An origination fee provides additional profit for the lender beyond what’s built into the interest rate. A good follow-up question: What are all of your lender fees? Be sure to specify “lender fees.” They’ll know what you mean because there are other additional costs, which you’ll ask about next.
These costs will be detailed in your official Loan Estimate document and your Closing Disclosure. But the sooner you know what they are, the better you can shop, compare — and prepare — for them.
11. What other costs will I pay at closing?
Fees charged by third parties, such as for an appraisal, a title search, property taxes and other closing costs, are paid at the loan signing. You can also see these costs in your Loan Estimate and Closing Disclosure.
12. How — and how often — will I be updated on the loan’s progress?
Will you have a single point of contact throughout the mortgage loan process? And how will you be updated on the progress: by email, phone or an online portal? Establishing your service expectations upfront, and seeing just how eager the lender is to meet them, will give a clear point of comparison among lenders.
13. Do I have to sign all the paperwork in person?
A mortgage e-closing is likely to proceed faster than a traditional mortgage closing, and you’ll probably be better informed about what’s happening every step of the way.
One other benefit of e-closings: Electronic documents can’t be submitted with a missing signature. On a paper document, a missing signature might not be detected immediately, causing headaches and delays.
14. How long until my loan closes?
Of course, you want to know what your target closing and move-in dates are so you can make preparations. And just as important: Ask what you should avoid doing in the meantime — like buying new furniture on credit and other loan-busting behavior.
Source: nerdwallet.com