I Asked ChatGPT How To Find a Bank That Will Give You a Mortgage: Here’s What It Said
Written by
John Schmoll
Edited by
Jenna Klaverweiden
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Buying a home is often seen as a key component of the American Dream. Unfortunately, homebuying has been challenging in recent years. Economic headwinds and high interest rates have deterred many Americans from purchasing their first home or upgrading to a new one.
Interest rates hit a three-year low in September and, after a brief rise, declined again in mid-October, per CBS News, which may cause some buyers to reenter the market. It’s essential for individuals to find the best place to obtain a mortgage loan. GOBankingRates asked ChatGPT how to find a bank that will give you a mortgage. Here’s what the artificial intelligence (AI) chatbot had to say.
Also see three things nobody tells you when you buy a house.
Check Your Readiness First
Readying your finances is essential before shopping for a mortgage. Banks want to lend money to relatively low-risk buyers, as this indicates stability. Although imperfect, banks commonly use a credit score to determine the ability to repay.
“Most lenders require a credit score of at least 620 for a conventional loan, while FHA loans may allow scores as low as 580 if you can make a higher down payment,” ChatGPT said. This aligns with what Fannie Mae states most lenders are looking for: a minimum credit score of 620.
Lenders also want to see that your indebtedness doesn’t consume too much of your monthly income. Lenders also consider the down payment when making their decision. “The more money you have saved for a down payment, typically between 3% and 20%, the stronger your application will look,” ChatGPT said.
Compare Different Types of Lenders
Large banks are good options for obtaining a mortgage. However, they’re not your only choices. Credit unions, online lenders and mortgage brokers are all legitimate choices for a mortgage loan.
If you’re a member of a credit union, it may be wise to consider them. “Credit unions often provide mortgages and may be more flexible or offer lower fees to their members,” the AI said. Online lenders like Rocket Mortgage or SoFi could be good alternatives that compare rates from multiple lenders simultaneously, streamlining the process for you.
ChatGPT also highlighted mortgage brokers, but they come with a cost. Brokers can often charge fees, or you may not get access to all lenders, according to Yahoo Finance.
Shop Around
Whenever getting a loan, it’s usually best to compare multiple lenders, like three to five, to find the best fit for interest rates, fees and available products. Online lenders can be helpful with this process. Don’t overlook the importance of lower rates. Even a difference of 0.5% to 1% can add tens of thousands of dollars over the life of the mortgage.
ChatGPT advised not to stop there, though. It’s best to consider getting prequalified or preapproved, with preference to the latter. “Preapproval not only gives you a clearer idea of what loan terms you qualify for but also shows home sellers that you are a serious buyer,” the chatbot explained.
Expect to provide pay stubs, bank statements or tax returns to initiate the process.
Strengthen Your Application If Needed
For Americans concerned about qualifying for a mortgage, there are several key things to focus on to improve their chances. Eliminating debt is often the most effective way to achieve this for most people.
“Paying down existing debt can lower your debt-to-income ratio, which makes you appear less risky to lenders,” ChatGPT said. Consider pairing that with a larger down payment. Both reduce risk in the eyes of the lender and may result in a lower interest rate. Finally, make timely payments on credit cards or other loans, as this will boost your credit score and look favorable in the lender’s eyes.
Getting a mortgage is an overwhelming but exciting time. By readying your finances and shopping around, you can simplify much of the process.
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