If you’re looking to buy a house, you don’t have to make an appointment with a loan officer to fill out a mortgage application. Many mortgage lenders have secure websites for borrowers to apply for a mortgage loan online.
This serves to your benefit because you’re not limited to mortgage lenders in your area. There’s the option of getting a loan from a local bank or credit union, or from an online lender.
There’s no rule that says you have to get a mortgage from the bank you use for a checking or savings account.
This institution may have mortgage products, but the interest rate they offer might not be as favorable as those offered by other lenders.
A low mortgage rate is important because your interest rate determines how much you pay on a monthly basis, as well as how much you pay over the life of the loan. Even the slightest interest rate increase can make a difference in your payment.
Let’s say you apply for a 30-year fixed-rate mortgage for $100,000, and Bank of America offers a rate of 4.62%. At this rate, you’ll pay about $740 a month, including property taxes, private mortgage insurance, homeowner’s insurance.
On the other hand, Wells Fargo might offer you a rate of 4.75%. This small increase only bumps the monthly payment up to $747. But you’ll pay about $3,000 more in interest over the 30-year term.
One benefit of applying for a home loan online is that you can submit multiple mortgage loan applications with different lenders and make a side-by-side comparison of the terms.
Multiple credit inquiries can lower your credit score. But fortunately, your credit score isn’t affected when similar loan inquiries occur in a short period of time. If you’re shopping for a mortgage loan, inquiries that take place within a 45-day window count as a single inquiry.
Credit scoring models are designed to recognize rate shopping and you’re not penalized for this behavior.
A mortgage pre-approval online lets you know how much you can spend on a house before looking at properties.
Some people make the mistake of submitting a purchase offer for a property before they’ve spoken with a lender. The problem with this approach is that a mortgage lender may later determine that you don’t qualify for the amount needed to complete the purchase.
Pre-approvals, however, remove the guesswork. Keep in mind that there’s a difference between a pre-qualification and a pre-approval. With a pre-qualification, the bank estimates how much you’re able to borrow based on information you provide on the pre-qualification form. But the bank doesn’t verify the information at this stage.
With a pre-approval, you provide supporting documentation with your loan application and authorize a credit check. For this reason, pre-approvals carry more weight than a pre-qualification.
Here is how the pre-approval process works:
1. Browse and compare today’s current mortgage rates offered by different lenders. Rate information is available on lender websites.
2. Complete an online mortgage application. Provide your personal information including your name, address, and Social Security number.
3. Upload supporting documentation to the lender’s secure portal.
- W-2s (last two years)
- Tax returns (if self-employed, for the last two years)
- Year-to-date Profit and Loss statement (if self-employed)
- Bank statements for past 60 days (checking, savings, investment accounts)
4. Begin the underwriting process. The mortgage lender will review your application, credit history, debts, income and supporting documentation to determine the maximum you can spend on a property. If you meet the qualifications for a loan, the lender will issue a pre-approval letter.
This letter strengthens your home offers. Some home sellers will only accept bids from pre-approved buyers.
Don’t let bad credit stand in your way of applying for a mortgage online.
Some people assume that they won’t qualify for a mortgage if they have a lower credit score. But while people with the highest credit scores qualify for the best interest rates, several home loan programs are available to those with lower scores.
After pulling your credit report and reviewing your credit history, your lender will determine which mortgage program is right for you.
The good news is that you can qualify for a conventional home loan with a credit score as low as 620. If your score is lower than this, you can get an FHA home loan (insured by the Federal Housing Administration) with a score as low as 500.
There is one caveat, however.
Even if you have a low credit score, your recent credit history must be positive. Typically, you can’t have more than one 30-day late payment in the past 12 months. You must wait between two and four years to get a mortgage after bankruptcy, and two to seven years after a foreclosure, depending on the mortgage program.
Buying a home provides a sense of accomplishment and can increase your net worth, but it’s important that you get the right mortgage and work with the best lender. With the ability to apply for a mortgage online, comparison shopping and getting the most favorable rate has never been more easier or convenient.