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Read our collection of guides and articles about homebuying to help you on your mortgage journey.

<p><em>Matty Kimura, a Processing Expert at Better Mortgage, gives a rundown of the documents you’ll need for your mortgage application.</em></p>

[![ Beige Bicycle with Basket Leaning Against Peach Home with Text That Reads "Let's Take the Work Out of Paper Work](https://media.better.com/content/prod/2017/12/prepare-headerimage6.png)](https://better.com/start)

<p>Are you thinking of buying a house? Or maybe you’ve heard rates are low and you want to refinance your current loan. Either way, you’ll need a mortgage. To help you prepare, let’s go over the types of documents you’ll be asked for, who will be looking at them, and why they matter.</p>

At Better Mortgage, we have an experienced, non-commissioned support staff dedicated to helping you every step of the way, but coming prepared is the best way to close on a mortgage successfully and without a hitch. To start, we’ll need you to collect some important documents to help us understand your income, debts, and assets. These are the foundation for our underwriting team to make sure you can afford your new mortgage. The docs we need are pretty standard fare across most lenders, but what makes Better Mortgage better is our smart technology, which personalizes document requests based on your situation. We won’t ask you for stuff that doesn’t make sense, which saves everyone a lot of time and headache. <br />
<br> <br />

[![ Here's What You Should Have Ready to Go When You Start Your Application](https://media.better.com/content/prod/2017/12/heres_what_you_should@2x.png)](https://better.com/start)

<h2 id="income">Income</h2>

<p>There are many important parts of a loan application, but calculating and verifying your income may be the most critical. </p>

<p>Income-related documents are used to understand and verify not only your earning history but also the likelihood that you’ll earn the same or more in the future. Since a mortgage is committing you to years of payments, it’s our responsibility as a lender to make sure you can pay both now and down the line. This especially holds true for people who earn self-employment income. Verifying how much money you make is the first step to confirming you’ll be able to repay your loan.</p>

<p>The income documents we need will depend on how you make money. Here’s a breakdown of what we’ll ask for based on how you earn:</p>

<p><img src="https://media.better.com/content/prod/2017/12/ruled-line@2x.png" alt="Green Line" /></p>

<h3 id="ifyouearnwageorsalariedincome">If you earn wage or salaried income:</h3>

<ul>
<li>Most recent paystub</li>
<li>W2 statement for the past year</li>
<li>Most recent personal tax return</li>
</ul>

<p><img src="https://media.better.com/content/prod/2017/12/ruled-line@2x.png" alt="Green Line" /></p>

<h3 id="ifyouearnrsuincomehttpsbettercomcontentrsuincome">If you earn <a href="https://better.com/content/rsu-income/">RSU income</a>:</h3>

<ul>
<li>Written Verification of Employment (WVOE) from your employer confirming RSU earnings from the previous 2 years</li>
<li>RSU agreement/vesting schedule for next 3 years</li>
</ul>

<p><img src="https://media.better.com/content/prod/2017/12/ruled-line@2x.png" alt="Green Line" /></p>

<h3 id="ifyouearnselfemploymentincomecontractincomeorrevenuefromabusinessyouown">If you earn self-employment income, contract income, or revenue from a business you own:</h3>

<ul>
<li>1099 statements for the past year</li>
<li>K-1 statements, if you own part of an S-Corporation or Partnership</li>
<li>Most recent 2 years of business tax returns, if you file and/or receive them</li>
<li>Most recent 2 years of personal tax returns</li>
<li>A year-to-date profit and loss statement, if an underwriter cannot verify your business’ income trend from tax returns</li>
</ul>

<p><img src="https://media.better.com/content/prod/2017/12/ruled-line@2x.png" alt="Green Line" /></p>

<h3 id="ifyouearnrentalincomefrominvestmentproperties">If you earn rental income from investment properties:</h3>

<ul>
<li>Most recent yearly personal tax return</li>
<li>A signed lease agreement, especially if you did not claim rental income on your most recent tax return</li>
</ul>

<p><img src="https://media.better.com/content/prod/2017/12/ruled-line@2x.png" alt="Green Line" /></p>

<h3 id="ifyoureceivechildsupportalimonypayments">If you receive child support/alimony payments:</h3>

<ul>
<li>A full copy of your divorce decree</li>
<li>Most recent personal tax return</li>
</ul>

<p><img src="https://media.better.com/content/prod/2017/12/ruled-line@2x.png" alt="Green Line" /></p>

<h3 id="ifyouearnfixedincome">If you earn fixed income:</h3>

<ul>
<li>Award letters for pension, Social Security, and/or disability income</li>
<li>Bank statements reflecting the most recent benefits</li>
<li>Most recent personal tax return</li>
</ul>

<p><br></p>

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<h2 id="debts">Debts</h2>

<p>On the flip side of income is your monthly debts. Together they make up your debt-to-income (DTI) ratio, a very important standard in any mortgage application.</p>

<p>Your DTI can be calculated by adding up your monthly debt (including student loans, car loans, credit card bills, and your future mortgage payments) and dividing that by your monthly income (money you earn before taxes). Better Mortgage can approve loans with up to 50% DTI – but the lower your DTI, the more financing options will be available to you. DTI seems straightforward but there are some specifics to take into account and <a href="https://better.com/content/improving-your-debt-to-income-ratio-dti-when-applying-for-a-mortgage/">many ways to reduce your DTI</a> too.</p>

<p><img src="https://media.better.com/content/prod/2017/12/ruled-line@2x.png" alt="Green Line" /></p>

<h3 id="hereswhatwellusetodetermineyourmonthlydebt">Here’s what we’ll use to determine your monthly debt:</h3>

<ul>
<li><p><strong>Your credit report.</strong> One of the first things you’ll do in the loan process is authorize a “hard credit pull.” This is how we learn information about your debts. Credit reports contain a few important pieces of information from the three credit bureaus: your credit score, balances and payment history on your accounts, any significant derogatory credit events, inquiries for new lines of credit, and prior addresses and names. <a href="https://better.com/content/how-your-credit-score-affects-your-mortgage/">Learn more about credit scores and mortgages here.</a></p></li>
<li><p><strong>If you have opened any new accounts</strong> that have not been fully reported on your credit profile yet, we’ll need a monthly statement.</p></li>
<li><p><strong>If you have any recent derogatory events on your credit report</strong>, especially bankruptcies, foreclosures, and short-sales, we’ll need release documents to confirm the date that the loan was settled.</p></li>
<li><p><strong>Verification of your property’s expenses.</strong> For refinances, this will include a mortgage statement and your homeowner’s insurance policy. Depending on the situation, we’ll also need confirmation of homeowner’s association dues and a solar panel agreement. If you’re buying a home, we’ll need a homeowner’s insurance quote.</p></li>
<li><p><strong>If you are divorced,</strong> we’ll need a full copy of your divorce decree to verify any recurring payments that are part of your ongoing debts.</p></li>
<li><p><strong>If you own other property,</strong> we’ll need to verify property-related expenses for that real estate as well. We’ll already have information on the mortgages on those properties from your credit report, but we will still need mortgage statements to link the accounts to the properties, and confirmation of homeowner’s insurance fees and homeowner’s association dues.</p></li>
</ul>

<p><br></p>

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<h2 id="assets">Assets</h2>

<p>In addition to your income and debts, we’ll also need proof of your assets. This allows us to verify you have the funds needed for closing, along with reserves if you happen to own additional real estate. </p>

<p><img src="https://media.better.com/content/prod/2017/12/ruled-line@2x.png" alt="Green Line" /></p>

<h3 id="toverifyyourassetswellneed">To verify your assets, we’ll need:</h3>

<ul>
<li><p><strong>At least 2 months of bank statements,</strong> including the full transaction history and current balances. </p></li>
<li><p><strong>If there are any large or recurring payments, or large deposits</strong> that fall out of typical use, we’ll need documentation for those transactions. For example, a large deposit into your checking account could be the result of liquidating funds from an investment account. In this case, statements from your investment account that line up with the deposit transaction would suffice. Or if you received a gift toward your down payment from a family member, we will need a letter confirming that it was truly a gift and not a loan.</p></li>
<li><p><strong>If you are using funds from your retirement account,</strong> we’ll need the terms of withdrawal to confirm that you would be able to draw from the account without unexpected penalties.
<br></p></li>
</ul>

[![ The Next Step: Reviewing Your Documents](https://media.better.com/content/prod/2017/12/Next_step@2x.png)](https://better.com/start)

<p>Once you’ve provided your initial documentation, an underwriter at Better Mortgage will review your application in its entirety. Based on the information and documents you provide, we may need to reach out to you for further clarification – this is to make sure that we fully understand your circumstances. At Better Mortgage, we follow Fannie Mae’s underwriting guidelines, which is the industry standard. And while underwriting guidelines have tightened up because of the 2008 financial crisis, we make every attempt to limit tedious requests and approve your application.</p>

<p>If you’re a first-time homebuyer or refinancer – or even if you’re an expert and have closed multiple times before – we know this can seem daunting. In any case, we are here to help and make this as easy as possible for you.</p>

<p><img src="https://media.better.com/content/prod/2017/12/ruled-line@2x.png" alt="" /></p>

<h2 id="weredigitalwhichmeansyoucan">We’re digital, which means you can:</h2>

<ul>
<li><strong>Upload your documents</strong> 24/7 instead of faxing or mailing them</li>
<li><strong>E-sign most forms</strong> instead of printing, signing, and then scanning</li>
<li><strong>Link your online bank accounts</strong> and tax preparation software instead of tracking down monthly statements and tax returns</li>
<li><strong>Log in</strong> to see the status of your application and any documents we still need from you</li>
<li><strong>Relax and enjoy</strong> the convenience of not having to visit a bank branch (you can always call, text, or email our team)</li>
</ul>

<p>Tracking down documents can be a pain, but at Better Mortgage, we’re committed to building technology to make your mortgage faster and simpler than ever before. Let’s get started.</p>

<p><br></p>

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Mortgage paperwork can often seem confusing, but this handy guide breaks down exactly what documents you’ll need.

What documents will I need for my mortgage?

Blog post image for What documents will I need for my mortgage?

[![ Top of Modern Style Home with Text That Reads: How to Understand Your Mortgage Costs](https://media.better.com/content/prod/2017/10/blog_totalcoastmortg_headerimg.png)](https://better.com/start)

<p>Mortgages – and all the costs associated with them – can be confusing, even if you’ve been through the process before. Here’s a framework to help you understand all the components and costs related to a mortgage so you can shop with confidence. </p>

<p>Let’s start with the basics. When you buy a home and get a mortgage, you’re responsible for <strong>upfront costs</strong> (including your down payment and closing costs) and continuing <strong>monthly mortgage payments</strong>.</p>

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<h3 id="upfrontcosts">Upfront Costs</h3>

<p><strong>Down payment</strong><br>
This is how much you are putting towards owning your home upfront (your lender is loaning you the rest). While 20% is often cited as a benchmark, for creditworthy borrowers with a steady income, a 3-5% down payment can be a <a href="https://better.com/content/5-percent-down-payment/">financially sound option</a>.</p>

<p><strong>Third-party fees</strong><br>
In a nutshell, third-party fees are charged by outside parties to make sure all the details and fine print associated with buying your home are taken care of. Third party fees are generally broken out into two different categories on your official <a href="https://better.com/content/a-quick-guide-to-your-loan-estimate/">Loan Estimate</a>, and include:</p>

<p><em>Services you cannot shop for <sup id="fnref:1"><a href="#fn:1" rel="footnote">1</a></sup></em><br>
These fees may vary slightly from lender to lender and can include:</p>

<ul>
<li>Appraisal: ~$550</li>
<li>Credit Report: ~$50 per borrower</li>
<li>Flood Certification: ~$14</li>
<li>Homeowners’ association certification: ~$325</li>
<li>Subordination fee (this fee may apply if you have a second lien, such as a HELOC)</li>
</ul>

<p>At Better Mortgage, the cost of the appraisal is paid when you lock your rate in.</p>

<p><em>Services you can shop for <sup id="fnref:2"><a href="#fn:2" rel="footnote">2</a></sup></em><br>
These are made up of title service fees, which essentially have to do with ensuring you have a legal claim to the property you are purchasing. In most states, the fee for conducting your closing is also a part of the title service fees.</p>

<p><strong>Other Fees</strong><br>
<em>Taxes and other government fees</em><br>
These include property taxes and recording fees (so your ownership of your home is in the public record). Different municipalities have different property tax rates, so these fees can vary depending on where your home is located (but will be exactly the same no matter which lender you choose, even if different lenders may have slightly different formulas to estimate it on your initial Loan Estimate).</p>

<p><em>Prepaids</em><br>
Prepaids are just what they sound like – advanced payments for some of the ongoing fees that are associated with your mortgage, including your homeowners insurance, property taxes, and interest. This estimate is probably the one most subject to change, as different municipalities and insurance providers require different amounts up front. Since many of these fees are paid monthly or quarterly, even the day of the month can affect what your total prepaid cost will be at closing. (Once again, even though lenders may estimate these slightly differently on your initial Loan Estimate, they will end up being the same on closing day, no matter which lender you choose).</p>

<p><strong>Costs or discounts associated with your rate (points or credits)</strong><br>
This is where you can really start comparing lender pricing. As we explain in our <a href="https://better.com/content/how-mortgage-rates-work/">mortgage rates post</a>, there are many factors that determine the rates that are available to you, including the market, your credit score, your loan type, and your property details.</p>

<p>But <em>you</em> also have control over your rate. You can “buy” a lower rate by paying a lender more up front in the form of prepaid interest called <strong>“points”</strong>. Or you can take lender <strong>“credits”</strong> to lower your closing costs, in exchange for a higher rate. (If you choose to take credits, this may show up as a negative number in your loan estimate). Each <strong>lender</strong> is going to decide how much they will charge you in points or other lender fees to give you those rates. <a href="https://better.com/content/no-cost-mortgage/">Learn more about points and credits here.</a></p>

<p><strong>Lender fees, origination fees, and application fees</strong><br>
These are additional fees that lenders may charge as the cost of doing business. Be sure to ask any lender you are talking to for an explanation of their fees and pricing, along with an official <a href="https://better.com/content/a-quick-guide-to-your-loan-estimate/">Loan Estimate</a>. </p>

<h3 id="monthlymortgagepayments">Monthly mortgage payments</h3>

<p>Your monthly mortgage payment, sometimes referred to as “PITI”, consists of four components: principal, interest, taxes, and insurance.</p>

<p><strong>Principal</strong>: This is money going toward the actual balance of your loan. The more you pay, the more equity (or ownership) you have in your house. As time goes by, you’ll pay more toward your principal and less toward interest. </p>

<p><strong>Interest</strong>: This is money going toward paying interest on your loan. As time goes by, you’ll pay less interest and more toward your principal. </p>

<p><strong>Taxes</strong>: Property or real estate taxes are determined locally, and vary from area to area. Tax rates can be quite high in certain areas, so it’s a good idea to research rates in advance as they can add significantly to your monthly payment. </p>

<p><strong>Insurance</strong>: Insurance can include homeowners insurance (which you’ll need to purchase after your offer has been accepted and before your loan is closed) as well as private mortgage insurance (PMI), which is typically required if you put less than 20% down. </p>

<p><strong>Potential changes to your monthly payments</strong><br>
If you have a fixed-term mortgage, such as a 15-year or 30-year fixed mortgage, your total cost of your <strong>principal and interest</strong> will remain the same each month (although the ratio of principal to interest will change). If you have an adjustable-rate mortgage (ARM), you will have the same payments for the initial fixed period, after which your interest rate will adjust and your payments will likely increase.</p>

<p>Your <strong>insurance</strong> premiums may go up from year to year depending on inflation, additions or upgrades you make to your home, or any claims you file. If you are paying PMI, you will likely be able to stop paying it after your loan-to-value ratio (LTV) is less than 80% (which essentially means you own more than 20% of your home).</p>

<p><strong>Property taxes</strong> are a percentage of your home’s value, so if the value of your home increases over the years, your property taxes will increase too.</p>

[![ Table: Components of Your Mortgage](https://media.better.com/content/prod/2017/10/Components.png)](https://better.com/start)

<h3 id="howtofindthebestpricedmortgage">How to find the best-priced mortgage</h3>

<p>Now that you know what all those fees and line items really mean, you’re ready to compare prices from different lenders.</p>

<ol>
<li>Ask the lenders you are talking to for a <strong>Loan Estimate</strong>, which is <a href="https://consumerfinance.gov/owning-a-home/loan-estimate/">a standard document created by the Consumer Finance Protection Bureau</a>. At Better Mortgage, once you’ve created an account you can log in and create as many Loan Estimates as you like based on different rates and terms that you are interested in.  </li>
<li><strong>Compare apples to apples.</strong> Make sure each Loan Estimate has the same loan amount, loan type (such as 30-year fixed), property value, and rate.  </li>
<li><strong>Don’t focus on “other costs”</strong> (taxes, government fees, and prepaids). These are estimated and will ultimately be the same across lenders (although a wildly different estimate may be a red flag).  </li>
<li><strong>Focus on the total loan cost and lender credits.</strong> This is where you’ll see the true difference in pricing between lenders. Look at <strong>Section D</strong> in your Loan Estimate, along with the <strong>“Lender Credits” line item in Section J</strong> to truly compare the difference between lenders. (It’s also common for the seller’s title company to be used. If this is the case you can also ignore title fees in your comparison since it will be the same across lenders.)</li>
</ol>

<p>At Better Mortgage, we’ve streamlined the mortgage process and <a href="https://better.com/content/5-reasons-why-loan-officer-commission-is-bulls-t/">done away with Loan Officer commissions and lender fees</a>, passing the savings to you. So once you have your Loan Estimates from us, feel free to shop around. We’re confident that we can get you the best terms. </p>

<h3 id="readytogetstarted">Ready to get started?</h3>

<p>We want to put you in control of your mortgage experience, while offering support and transparency along the way. Make a Better Mortgage <a href="https://better.com/start"> account</a> to create your own Loan Estimates, or <a href="https://better.com/schedule-call?TRACKINGSOURCE=blog_wittcoam">schedule a call with a non-commissioned Mortgage Expert</a> to talk about your options.</p>

<p><br></p>

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<div class="footnotes"><ol><li class="footnote" id="fn:1"><p>At Better Mortgage, we’ve worked to standardize these costs and pass the savings to you, capping as many third-party fees as possible. If your appraisal fee ends up costing more, we will cover it. Less? We'll pay back the difference. <a href="#fnref:1" title="return to article">↩</a></p></li>
<li class="footnote" id="fn:2"><p>At Better Mortgage, we do our best to keep title fees down. If you are able to find a cheaper provider, we are happy to use them. In many cases, the seller’s title company may be used.  <a href="#fnref:2" title="return to article">↩</a></p></li></ol></div>

Mortgages can be confusing, even if you’ve gotten one before. Here’s a breakdown of all the costs that come with getting a mortgage.

What’s the Total Cost of a Mortgage?

Blog post image for What is the total cost of a mortgage?

What is the total cost of a mortgage?

<p><em>Sathi Roy, a non-commissioned Mortgage Expert at Better Mortgage, gives an overview of mortgage rates</em></p>

[![Orange Home On the Right Against Blue Sky with Text That Reads: Which Factors Affect Mortgage Rates?](https://media.better.com/content/prod/2017/10/howrateswork-headerimage.png)](https://better.com/schedule-call?TRACKINGSOURCE=blog_hmrw)

<p>"What factors determine the mortgage rates I can get? What are points and credits, and do I need them? How do I compare rates between lenders?" As someone who talks to both first-time homebuyers and refinance customers every day, I know how confusing and intimidating mortgage rates can seem. My goal is to help our customers clearly understand their options so that they can shop with confidence. That means being able to make informed decisions about the best loan product, rate, and terms for their situation.</p>

<p><br></p>

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<h3 id="whatfactorsgointomortgagerates">What factors go into mortgage rates?</h3>

<p>1) First, there’s a <strong>baseline</strong> for rates that is determined by the <strong>market</strong> – in very simplified terms, this is dependent on how the economy is doing. Lending institutions, and people like you and I, have no control over this baseline, which is why rates can fluctuate from week to week or even day to day. For example, in the current climate, mortgage rates typically range from about 3.5 to 5%.</p>

<p>2) Then there’s the <strong>property</strong> itself. Is it a detached single-family unit, or a condo? Your primary home, or an investment property? All those factors can affect your rate.</p>

<p>3) The <strong>type of mortgage</strong> you’re getting matters too. You can get loans with different payment terms, such as 15-year or 30-year fixed mortgages, which means you lock in the same interest rate and monthly payment amount for the life of the loan. There are also <a href="https://better.com/content/what-is-an-arm/">adjustable-rate mortgages</a>, which have a fixed rate for a set period (such as 5, 7, or 10 years), after which rates adjust each year according to the market. Depending on what kind of loan you’re looking for, the available rates will be different. </p>

[![ Green Diagram: What Affects Your Rates? The Market, Type of Mortgage, Your Credit Score, Down Payment Size, Your Point or Credit Choices...](https://media.better.com/content/prod/2017/10/whataffectsrates.png)](https://better.com/mortgage-rates/purchase)

 Green Diagram: What Affects Your Rates? The Market, Type of Mortgage, Your Credit Score, Down Payment Size, Your Point or Credit Choices...

<p>4) Your <strong>credit score</strong> plays a big role in determining your rates. It helps lenders evaluate your ability to pay back your loans, based on your borrowing history. The higher your credit score, the better rates you’ll be able to get, which can lead to significant savings over the life of your mortgage. <a href="https://better.com/content/how-your-credit-score-affects-your-mortgage/">Read more about credit scores and mortgages here.</a></p>

<p>5) The size of your <strong>down payment</strong> can also play a role in your rates (though not as much as your credit score). The exact impact of your down payment percentage depends on your unique financial scenario. We recommend talking to your dedicated Mortgage Expert to figure out how different down payment scenarios might affect your monthly mortgage payment.</p>

<p>6) <strong>You have control over your rate too</strong>. You can “buy” a lower rate by paying a lender more up front in the form of prepaid interest called “<strong>points</strong>.” Or you can take lender “<strong>credits</strong>” to lower your closing costs, in exchange for a higher rate. <em>(While buying a lower rate may seem appealing, keep in mind that depending on how soon you sell or refinance your home, it may not be worth the upfront expense.)</em> <a href="https://better.com/content/no-cost-mortgage/">Learn more about points and credits here.</a></p>

<p>7) Of course, the final factor is the <strong>lender</strong>. Each lender is going to take all of these factors into account and determine the rates they will offer you. They also decide how much they will charge you in points or other lender fees to give you those rates. Be careful – this is where lenders are known to <a href="https://better.com/content/dont-take-the-bait-heres-the-reality-of-refi-rates/">bait and switch</a>.</p>

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<h3 id="findingtheratethatworksforyou">Finding the rate that works for you</h3>

<p>At Better Mortgage, we’ve built tools to help you run the numbers on different scenarios, so that you can easily see a breakdown of monthly payments and closing costs for different rates, terms, and points/credits. You can get started in seconds by checking today’s rates for home <a href="https://better.com/mortgage-rates/purchase"> purchase</a> and <a href="https://better.com/mortgage-rates/refinance"> refinance</a>.</p>

<p>But to get the most accurate rate quotes, here’s what I recommend to customers:</p>

<ol>
<li><a href="https://better.com/start"> Create an account on Better.com</a>  </li>
<li>Enter some property details and basic financial information. Since there are various factors that can go into determining your rate, the more information we have to work with, the better.  </li>
<li>Once you’ve entered your information, use the points and credits tool on our rate table to run the numbers on different scenarios for your situation.  </li>
<li>Create your own <a href="https://better.com/content/a-quick-guide-to-your-loan-estimate/">Loan Estimate</a> for each scenario, so you can compare the exact breakdown of costs for different options. </li>
</ol>

<p>Keep in mind that your Loan Estimate will include all closing costs, including an estimate of required third-party fees (like title, appraisal, recording fees, and taxes). These costs won’t impact your rate, but they may impact the size of your down payment since you’ll need to pay them upfront.</p>

<p>Of course, we’re always here to help guide you. You can get on the phone with a non-commissioned Mortgage Expert like me to talk through your options. <a href="https://better.com/schedule-call?TRACKINGSOURCE=blog_hmrw">Schedule a call today.</a></p>

<h3 id="gettingbetterprices">Getting Better prices</h3>

<p>At Better Mortgage, we’ve streamlined the mortgage process and <a href="https://better.com/content/5-reasons-why-loan-officer-commission-is-bulls-t/">done away with Loan Officer commissions and lender fees</a>, passing the savings to you. So once you have your Loan Estimates from us, feel free to shop around. We’re confident that we can get you the best terms.</p>

<h3 id="readytogetstarted">Ready to get started?</h3>

<p>We want to put you in control of your rates and your mortgage experience, while offering support and transparency along the way. Start exploring your options by checking today’s rates for home <a href="https://better.com/mortgage-rates/purchase"> purchase</a> and <a href="https://better.com/mortgage-rates/refinance"> refinance</a>, <a href="https://better.com/start"> creating an account</a>, and <a href="https://better.com/schedule-call?TRACKINGSOURCE=blog_hmrw">scheduling a call with a Mortgage Expert</a>.</p>

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Whether you’re buying or refinancing a home, mortgage rates can seem confusing. Here’s a quick overview to help you shop rates with confidence.

How mortgage rates work

Blog post image for How mortgage rates work

<p><em>Kurtis Rhee, Real Estate Partnerships Manager at Better Mortgage, explains how you can make your offer stand out in a seller’s market.</em></p>

<p><a href="https://better.com/start-purchase"><img src="https://media.better.com/content/prod/2017/10/blog_7waysoffer_headerimg.png" alt="Image of a Row of Six Multi-colored Homes Against Blue Sky That Reads Stand Out in a Competitive Market"></a></p>

<p>I talk to people every day who are wondering just how they’ll get their dream home in competitive markets like San Francisco, Denver, and Seattle. In these areas, sellers don’t just have multiple offers. They have offers from cash buyers – people who have enough funds to pay for the home outright. Cash offers are seen as less risky to sellers because they know the money is in the bank. Other offers are contingent on the buyer securing a loan from a lender, which could theoretically fall through. The key is finding a lender that removes that risk.</p>

<p>When you’re competing with cash buyers, making your offer stand out may seem impossible. But at Better Mortgage, we’re helping our customers do just that by adding as much certainty as possible before they even put an offer on their dream home. </p>

<p>Here’s how you can prepare to make the best offer possible (including one that might be even as competitive as cash). <br />
<br>  </p>

<h2 id="1doyourresearch">1. Do your research.</h2>

<p>Determine what’s important to you (and your partner, if you’re buying a home with someone else) before you start looking. In a competitive market, there may not be time to investigate school districts or debate how many bedrooms you need once you’ve found a home you’re interested in. Having your criteria established early on, including what you’re willing to be flexible on, can help give you clarity and reduce stress when you go shopping and start making offers.</p>

<p><br></p>

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<p><br></p>

<h2 id="2findagreatrealestateagent">2. Find a great real estate agent.</h2>

<p>A good real estate agent should have a solid understanding of the market (including how much homes like the ones you’re interested in are generally selling for), be proactive, and communicate well. Don’t just go with the first recommendation you get –  vet a few agents to make sure you’re comfortable with who you’re going with. <br />
<br>  </p>

<h2 id="3createcertaintyforthesellersagentandyou">3. Create certainty for the seller’s agent – and you.</h2>

<p>Of course, before you go shopping, you need to know how much you can get financing for. In a hot market, sellers won’t take your word for it – they’ll need proof from a lender. At Better Mortgage, we offer our customers a <a href="https://better.com/start-purchase">Verified Pre-Approval Letter</a>. It involves both you and us putting in a bit of extra effort up front to verify your financial details and documents so that we can tell you exactly how much you’re approved to borrow. You can also easily change the approval amount on the letter if you don’t want to share your full amount with sellers.

<p>Essentially, our Verified Pre-Approval Letter can give you the certainty and confidence of a cash buyer because it means that we’ve already underwritten your finances. Some of our customers even waive the financing contingency in their offer once they have their Verified Pre-Approval from us. Talk to your Better Mortgage Loan Consultant and your agent to understand if this may be a good course of action for your situation. <br />
<br>  </p>

<h2 id="4bringyourlendertothetable">4. Bring your lender to the table.</h2>

<p>Even with a pre-approval letter in hand, sometimes a seller needs to hear it from the horse’s mouth. If you can tell Better about a property before you make an offer, your dedicated Loan Consultant is more than happy to call the seller’s agent on your behalf to confirm that you’ve been fully underwritten and to eliminate fears that you will run into financing issues as a result of your income, assets, and debt. And because we fund and originate all of our loans in-house, our loan consultants, underwriters, and closing agents are always available to answer any questions and make sure the closing process goes smoothly. <br />
<br>  </p>

<h2 id="5getbackup">5. Get back up.</h2>

<p>In certain situations, your property might also qualify for a Better Mortgage Commitment Letter, which gives you the opportunity, if you choose, to waive both the financing and the appraisal contingency. The Better Mortgage Commitment Letter ensures that Better Mortgage will cover up to $50,000 (or 7% of the purchase price) of your escrow deposit should something prevent us from funding your loan through no fault of your own.<sup id="fnref:1"><a href="#fn:1" rel="footnote">1</a></sup> Eligibility is based on the property type and details of the loan – we can let you know if you qualify once you let us know the address of the property you’re interested in. <br />
<br>  </p>

<h2 id="6offeraquickclosing">6. Offer a quick closing.</h2>

<p>The best part about having a Verified Pre-Approval letter is that once your offer is accepted and you’re ready to apply for a loan, our underwriters have already done most of the work verifying your financial details. That means we can usually close your loan weeks faster than the industry average, many times within 21 days from locking your rate.(The industry average is as much as 50 days.<sup id="fnref:2"><a href="#fn:2" rel="footnote">2</a></sup>) <br />
<br>  </p>

<h2 id="7makeitpersonal">7. Make it personal.</h2>

<p>Selling a home can be just as big of a decision as buying one, and many sellers want to know that they’re leaving their home in good hands. It never hurts to write a sincere letter to the owners, letting them know why you love their home and assuring them that you’ll treat it well. If a seller is choosing between a few offers, your personal touch could be the deciding factor.</p>

<p><br> <br />
<a href="https://better.com/content/the-guide"><img src="https://media.better.com/content/prod/2017/10/FTHB_adforblogA.png" width="1200" border="0" align="middle" alt="Image of a Row of Six Multi-colored Homes Against Blue Sky That Reads Stand Out in a Competitive Market"></a> <br />
<br></p>

<p>Buying a home can be daunting, but we’re here to help make the process as smooth as possible. <a href="https://better.com/start/shopping-for-a-home">Apply for your pre-approval</a> today and <a href="https://better.com/schedule-call?loanType=purchase&amp;TRACKINGLOCATION=7wtmyoso&amp;TRACKINGBRANDING=purchase">schedule a call</a> with a non-commissioned Loan Consultant like me to talk about how we can help make your offer stand out.</p>

<p><br></p>

<div style="text-align: center">  
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<p><br></p>

<div class="footnotes"><ol><li class="footnote" id="fn:1"><p>We are committed to closing all single family/detached unit loans that have Verified Pre-Approval in 21 days or less. Our commitment for condos, attached units, and loans without Verified Pre-Approval is 25 days, and our commitment for jumbo loans is 30 days. <a href="#fnref:1" title="return to article">↩</a></p></li>
<li class="footnote" id="fn:2"><p>As of January 2017. <a href="https://www.housingwire.com/articles/36305-the-trid-ripples-time-to-close-mortgage-loans-continues-to-rise">https://www.housingwire.com/articles/36305-the-trid-ripples-time-to-close-mortgage-loans-continues-to-rise</a> <a href="#fnref:3" title="return to article">↩</a></p></li></ol></div>

Struggling to get your dream home in a competitive market? These tips can help you make an offer that truly stands out to sellers.

7 Ways to Make Your Offer Stand Out In the Housing Market

Blog post image for 7 ways to make your offer stand out in a competitive market

7 ways to make your offer stand out in a competitive market

[![ Shadowy Image of Modern and White Computer Chair, Desk and a Laptop](https://media.better.com/content/prod/2017/07/blog_improvingyourDTI_headerimg.jpg)](https://better.com/preapprovals/purchase)

<p>When I talk to customers about getting a mortgage, they’re often concerned about their <a href="/content/how-your-credit-score-affects-your-mortgage">credit score</a>, which is an indicator of their ability to pay back loans and can affect the rates they’ll be able to get. While credit scores are certainly important, what they often don’t know is that another number, <a href="/content/what-is-a-good-debt-to-income-ratio">debt-to-income ratio (DTI)</a>, can play an even bigger role in their ability to get a mortgage. In fact, a high DTI is the #1 reason mortgage applications get rejected<sup id="fnref:1"><a href="#fn:1" rel="footnote">1</a></sup>. So what's a DTI, exactly? Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income. I’ll get into the specifics of this calculation next.</p>

<p>Most lenders typically offer loans to creditworthy borrowers with DTIs as high as 43-47%. That limit is based on policies by government-backed lenders like Fannie Mae, put in place to protect customers against predatory lending practices. As of July 29th, 2017, we are working with Fannie Mae to offer loans with DTIs of up to 50% for creditworthy borrowers<sup id="fnref:2"><a href="#fn:2" rel="footnote">2</a></sup>. However, <strong>the lower your DTI, the more financing options will be available to you</strong>. Let’s look at what goes into calculating that number.</p>

<p><br></p>

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<p><br></p>

<h2 id="howdtiiscalculated">How DTI is calculated</h2>

<p>On the one hand, the math for calculating your DTI is simple – we add up what your monthly debt will be once you have your new home (such as student loans, car loans, credit card bills, and your future mortgage payment) and divide it by your gross monthly income (how much money you earn before taxes).</p>

[![ Debt to Income Ratio = Monthly Debt Payments / Monthly Gross Income x 100](https://media.better.com/content/prod/2017/07/blog_improvingyourDTI_graphics-02.png)](https://better.com/preapprovals/purchase)

<p>The tricky part about calculating DTI is that there can be several moving parts.  </p>

<h3 id="forexample">For example:</h3>

<ul>
<li>If you haven’t found your new home yet, we won’t know your exact mortgage payments, property taxes, or insurance payments, so we’ll have to estimate.</li>
<li>If you already own a home, we’ll need to include both your future and current mortgage payments as debt (unless the purchase of your new home is contingent on the sale of your old home).
<br> <br />
In addition, when we calculate income (the other half of the DTI equation), we use <a href="https://better.com/content/so-youre-wondering-how-much-house-can-you-actually-afford/">conservative calculations</a> because we want to make sure you get a mortgage that’s affordable, now and in the future.  </li>
</ul>

<h3 id="forexample">For example:</h3>

<ul>
<li>If you’re self-employed or compensated by commission or <a href="https://better.com/content/rsu-income/">RSUs</a>, we may not be able to count all 100% of that income, given that these forms of income tend to be less consistent. </li>
<li>If you are <a href="https://better.com/content/self-employed-heres-how-to-get-a-mortgage/">self-employed</a>, it’s typically beneficial to write off your business expenses to lower your tax bill. But those tax deductions may also lower your qualifying income, since underwriters are looking at your net (not gross) income. </li>
<li>If you have rental income from an investment property, we’ll need to see that income on your tax returns (or rental checks if your taxes haven’t been filed yet) and we’ll only be able to use a portion of that income to be conservative. </li>
<li>If you plan on turning your current home into a rental property, you’ll need to have a lease agreement in place for us to consider the potential income. </li>
</ul>

[![ Got More Questions? Our Free Guide Has the Answers. Get the Guide](https://media.better.com/content/prod/2017/10/FTHB_adforblogD.png)](https://better.com/content/the-guide)

<h2 id="wecanhelpgiveyouclarityaboutyourdti">We can help give you clarity about your DTI</h2>

<p>At Better Mortgage, our goal is to give you as much certainty as we can, as soon as we can, about how much you’ll be able to get financing for. </p>

<p>When you get our <a href="https://better.com/preapprovals/purchase">3-minute pre approval</a>, we run a soft credit check (which doesn’t affect your score). This allows Mortgage Experts like me to look at your debts and credit in more detail and get a more accurate picture of your DTI. </p>

<p>If you’re planning on buying soon, we also encourage you to upgrade to our <a href="https://better.com/content/vpal/">verified pre-approval</a>. Our underwriting team will review things like your tax returns, pay stubs, and any other documents specific to your financial situation, so we can tell you exactly how much you are qualified to borrow. This helps ensure there aren’t surprises about your DTI when you do apply for a mortgage. </p>

<h2 id="tipstoconsiderforloweringyourdti">Tips to consider for lowering your DTI</h2>

<p>Lowering your DTI can have a big impact on the type of financing you can get. If you have some flexibility on when you plan on buying, taking time to lower your DTI (and improve your credit score) can save you a lot of money over the life of your loan.</p>

<h4 id="afewdtireductionstrategiestoconsider">A few DTI reduction strategies to consider:</h4>

<ul>
<li>If possible, pay off your car loan before applying for your mortgage.</li>
<li>If you plan on purchasing a car, considering waiting until after you’ve bought your home.</li>
<li>Start paying off your credit cards in full, one by one. (Don't close the cards after you pay them off, as this can hurt your credit score.)</li>
<li>If possible, refinance or consolidate current loans to reduce your monthly payments.</li>
<li>Consider adding a co-borrower with a low DTI to your loan (keep in mind that if they have a low credit score, it could negatively affect your financing options).</li>
<li>If you plan on using rental income, make sure you have lease agreements in place.</li>
<li>If you plan on living with a partner, parent, or roommate in your new home, talk to us about how we might include some of that income in your DTI calculation.</li>
</ul>

<h2 id="readytoexploreyouroptions">Ready to explore your options?</h2>

<p>We can help you understand your DTI and the financing options available to you. Start by getting your <a href="https://better.com/preapprovals/purchase">3-minute pre approval</a>. Then <a href="https://better.com/schedule-call?loanType=purchase&amp;TRACKINGLOCATION=iydtirdwafam&amp;TRACKINGBRANDING=purchase">schedule a call</a> so we go over the numbers with you.</p>

<p><br></p>

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<p><br></p>

<div class="footnotes"><ol><li class="footnote" id="fn:1"><p><a href="https://www.washingtonpost.com/realestate/fannie-mae-will-ease-financial-standards-for-mortgage-applicants-next-month/2017/06/05/9b391866-4a0b-11e7-9669-250d0b15f83b">https://www.washingtonpost.com/realestate/fannie-mae-will-ease-financial-standards-for-mortgage-applicants-next-month/2017/06/05/9b391866-4a0b-11e7-9669-250d0b15f83b</a> <a href="#fnref:1" title="return to article">↩</a></p></li>
<li class="footnote" id="fn:2"><p><a href="https://www.housingwire.com/articles/40382-fannie-mae-raises-debt-to-income-ratio-to-further-expand-mortgage-lending">https://www.housingwire.com/articles/40382-fannie-mae-raises-debt-to-income-ratio-to-further-expand-mortgage-lending</a> <a href="#fnref:2" title="return to article">↩</a></p></li></ol></div>

A high Debt to Income Ratio (DTI) is the #1 reason mortgage applications get rejected. Learn how your DTI can affect your mortgage and how to lower it.

Lower debt to income ratio (DTI) for a mortgage | Better Mortgage

Blog post image for Lower Debt to Income Ratio (DTI) for a mortgage

Lower Debt to Income Ratio (DTI) for a mortgage

<a href="https://better.com/content/vishal-garg-better-ceo/">*Vishal Garg,*</a> *Better Mortgage [Founder and CEO](https://www.forbes.com/sites/dianatsai/2021/10/20/how-bettercom-quietly-became-a-77b-unicorn-personal-insights-from-founder-vishal-garg/?sh=5a1228ab40d0), demystifies the low down payment mortgage.*

<hr />

![3-5% down](https://cdn.builder.io/api/v1/image/assets%2Fea37b90b89334a2ab1714e2159c75418%2F05c282c87bf744a39e0d801413078569)

Becoming a homeowner is a huge milestone in many people’s lives, but it can be hard to know when you’re ready. At Better Mortgage, we've found that many people don't take the next step because of how daunting it can seem to save up for a large down payment.

We want to help you see yourself as a homebuyer by giving you accurate, transparent information about your financing options. In addition to eliminating unfair <a href="https://better.com/content/5-reasons-why-loan-officer-commission-is-bulls-t/">commission structures</a>, lender fees, and <a href="https://better.com/content/dont-take-the-bait-heres-the-reality-of-refi-rates/">bait-and-switch</a> quotes, we work with government-backed investors like Fannie Mae and other reputable banks to offer a variety of loan types, to help people chose the best financing option for them.

<br>

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<br>

## Considering a 3-5% down payment

For example, we can offer qualified borrowers financing options with as little as 3% down. Now, I know what you’re thinking. That sounds risky. But it’s not – anymore. Before the housing crisis, these types of loans were often offered to people who were at a high risk of defaulting, such as people with extremely high <a href="https://better.com/content/improving-your-debt-to-income-ratio-dti-when-applying-for-a-mortgage/">debt-to-income ratios</a>. Since then, the mortgage industry has been regulated to protect people from those kinds of predatory loans.

For borrowers with great credit and a steady income, a 3-5% down loan can be a financially sound option, allowing you to start investing and building equity sooner.

## The difference between what you can afford and the size of your down payment

Essentially, you pay for your home with:

- An initial large payment (your down payment)</li>
- Ongoing installments, with interest (your monthly mortgage payment)</li>

Many potential homeowners focus on the first part, which is their down payment. But lenders are also looking at your *future* ability to pay, which is indicated by a steady income and a great <a href="https://better.com/content/how-your-credit-score-affects-your-mortgage/">credit score</a>.

## Let’s look at an example

Let’s say you have high student loan debt, but a stable career with steady income (and the tax returns and pay stubs to prove it). And you live in a city where your monthly rent is high – even higher than what a monthly mortgage payment might be.

In this instance, you may not have a 20% down payment saved up, since most of your income has gone towards rent and paying off student loans. But your income profile, and the fact that you’re already making high rent payments, can be a signal to lenders that you’ll be able to make consistent mortgage payments.

<br>

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<br>

#### The bigger picture: backed by data

An analysis of historical loan data by Laurie Goodman, Jun Zhu, and Taz George at the Urban Institute shows why government-backed investors like Fannie Mae see relatively little risk in qualifying mortgage loans with down payments as low as 3-5%:

Data shows that credit is a stronger indicator of default risk than down payment size. The percentage of defaults of 5-10% down loans versus 3-5% down is very similar.*

“Of loans that originated in 2011 with a down payment between 3-5 percent, only 0.4 percent of borrowers have defaulted. For loans with slightly larger down payments – between 5-10 percent – the default rate was exactly the same. The story is similar for loans made in 2012, with 0.2 percent in the 3-5 percent down-payment group defaulting, versus 0.1 percent of loans in the 5-10 percent down-payment group.” – Urban Institute

<p><a href="https://better.com/preapprovals/purchase"><img src="https://media.better.com/content/prod/2017/07/default_rates_FICO.jpg"></a></p>

What does this mean for Americans with goals of homeownership? For a couple with $25,000 saved up for a down payment, it could be the difference between being able to put 10% down for a 1-bedroom home that costs $250,000, versus putting 5% down and getting for a 2-bedroom home for $500,000.

## The bottom line

We think if you’re considering homeownership, you shouldn’t have to keep renting just to save up for a large down payment. Government-backed investors like Fannie Mae agree. They want to help more people build equity through homeownership, and they’re doing so by backing loans with as low as even a 3% down payment, for borrowers who fit the profile.

If you’re considering buying a home, we’re here to help you understand your options. Take a few minutes today to explore whether homeownership is a possibility with our <a href="https://better.com/preapprovals/purchase">3-minute basic pre-approval</a>. There is no fee, no obligation, and researching your financial options will not affect your credit score. You can also talk through your options by <a href="https://better.com/schedule-call?loanType=purchase&amp;TRACKINGLOCATION=5pdp&amp;TRACKINGBRANDING=purchase">scheduling a free call</a> with one of our non-commissioned Mortgage Experts.

<p><br></p>

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<p><br></p>

<p class="legal"><a href="http://www.urban.org/urban-wire/why-government-sponsored-enterprises-support-low-down-payment-loans-again-no-big-deal">*Why the Government Sponsored Enterprises' support of low-down payment loans again is no big deal</a></p>

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Considering a 5% down payment for your mortgage? We're here to help demystify the low down payment mortgage.

When a 5% down payment isn't a risk

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When a 3-5% down payment isn't a risk

<p><em>Viral Shah (Better Mortgage’s Head of Capital Markets) explains how an adjustable-rate mortgage works.</em></p>

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Choosing a mortgage type is one of the many decisions a homebuyer needs to make – and it’s a big one. After the 2008 housing crisis, many buyers were wary of adjustable rate mortgages (ARMs). But in instances where you’re planning on selling your home within 10 years, [they could be the better option](https://better.com/content/so-youre-considering-an-adjustable-rate-mortgage/).

Here’s a quick overview of what an adjustable rate mortgage is:

<h2>How do ARMs work?</h2>

While traditional fixed rate mortgages have the same rate for the entire life of the loan (typically 15, 20, or 30 years), adjustable rate mortgages (ARMs) are a bit different. ARMs have an initial fixed period where you will pay a fixed interest rate, followed by an adjustable period where the interest rate fluctuates. Current conforming ARMs use an index rate called the Secured Overnight Financing Rate (SOFR) to guide these adjustments. 

<strong>Naming:</strong> (Fixed period in years / number of adjustments per year). For example, *10/6m* means 10 year fixed with adjustments every 6 months after that. 

<strong>Fixed period:</strong> You’ll choose from a 5-year, 7-year, or 10-year fixed period, typically based on how long you expect to live in the house. After the fixed period, the rate adjusts twice per year (every 6 months).

<strong>Adjustable period:</strong> After the fixed period is over, the rate will adjust every 6 months based on the following formula: 30 day average of SOFR (Index) + (Margin). Investors set the value of the margin but it is typically between 2.75% and 3%. Regardless of what value is used, the margin always stays the same, but the value of the SOFR index will vary. The SOFR index is maintained by the New York Federal Reserve and can be accessed directly on the NY Fed website or on sites like the Wall Street Journal and its value changes daily. As of 2/22/2021, the 30-day average SOFR was 0.045%, which would mean your ARM loan interest rate could be .045% (Index) + (Margin) or between 2.795% and 3.045%.

<h2>How much can the rate move?</h2>

ARMs have “caps,” which limit the amount that the rate can increase. This protects you against sharp moves if you move into the adjustable period.

<strong>Initial Adjustment Cap:</strong> The most the total rate can increase by in the first adjustment period. Typically 2% for 5/6m ARMs and 5% for 7/6m or 10/6m ARMs.

<strong>Subsequent Adjustments Cap:</strong> The most the total rate can increase by in subsequent adjustments periods. Typically 1%.

<strong>Lifetime Adjustment Cap:</strong> The most the rate can increase above the initial fixed rate — ever. Typically 5%.

For example: If your initial 5/6m ARM fixed rate was 3%, once the fixed period is over, it can’t increase more than 4% every year, nor can it ever exceed 8% in total.

<h5>Example rates based on the current interest rate environment:</h5>

![Example Rates Based on the Current Rate Interest Environment](https://cdn.builder.io/api/v1/image/assets%2Fea37b90b89334a2ab1714e2159c75418%2Fc8f48b0ce4ac43adbb003487ac4f1a6c)
<p class="legal">This table is for illustrative purposes only.</p>

At Better Mortgage, we recommend considering an ARM only if you’re reasonably certain you’re going to sell your house in 10 years or less: [here’s why](https://better.com/content/so-youre-considering-an-adjustable-rate-mortgage/).

If you’re curious about what ARM rates are like today, take a look at our [Rate Quote Tool](https://better.com/mortgage-rates/purchase). We’re here to help you figure out which option is right for you.

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While traditional fixed rate mortgages have the same rate for the entire life of the loan (typically 15, 20, or 30 years), adjustable rate mortgages (ARMs) are a bit different.

What is an ARM?

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<p><em>The Loan Estimate is intended to provide a clear and concise summary of the terms and costs associated with any loan. Here’s how to read it with confidence.</em></p>

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<p><br><br> <br />
The Loan Estimate (LE) provides a clear and concise summary of the terms of your loan to help you understand the features, costs and risks associated with your mortgage as required by the Consumer Finance Protection Bureau (CFPB). Before moving forward with any lender, you should be sure to compare and understand your Loan Estimate.  </p>

<h2 id="yourinitialle">Your initial LE</h2>

<p>This is page 2 of sample LE in the CFPB-approved format. Make sure your lender provides an estimate in this format. Anything that looks different is not an official Loan Estimate.</p>

<p><a href="https://better.com/start"><img src="https://media.better.com/content/prod/2016/12/LE-page-2-no-annotation.png"></a> <br />
<em><p style="font-size:1.4rem;">Page 2 of the LE details your loan costs</p></em></p>

<h2 id="tipsforcomparinglesfromdifferentlenders">Tips for comparing LEs from different lenders</h2>

<p>Here are a few things to look out for: </p>

<h4 id="1thirdpartyfeesappearingononelendersleandnotanothers">1. Third-party fees appearing on one lender’s LE and not another’s</h4>

<p>You should raise this with your Mortgage Expert. While the fee amount can vary, the types of third-party fees associated with a loan are fairly constant. One lender may be missing something. </p>

<h4 id="2differencesinloanamountforarefinance">2. Differences in loan amount for a refinance</h4>

<p>A lender may increase your loan amount slightly to create a “<a href="https://better.com/content/no-cost-mortgage/">no closing cost loan</a>”. Borrowing a little more than the payoff on your current loan is one way to offset fees at the closing table, but this is increasing your debt to pay for your closing costs; it does not make them go away.  For an apples-to-apples comparison across lenders, you should get LEs with identical loan amounts.</p>

<h4 id="3promisesofcreditsafterclosethatdonotappearonthele">3. Promises of credits after close that do not appear on the LE</h4>

<p>This is a major red flag. The purpose of the LE is to create transparency and accountability. You lose both by transacting outside of the standard disclosure.</p>

<h4 id="4increasingcostsduringachangeincircumstance">4. Increasing costs during a change in circumstance</h4>

<p>Some lenders may advertise attractive rates and fees for one product, then switch into something less competitive (<a href="https://better.com/content/loan-estimate-101/">bait-and-switch</a>). You should ask about any additional fee and look at the relative competitiveness of the new product by continuing to shop before locking.</p>

<h2 id="abetterway">A Better way</h2>

<p>Better Mortgage is committed to a transparent and efficient mortgage process. Contact us by email (<a href="mailto:hello@better.com">hello@better.com</a>), phone (<a href="tel:888-501-3186">888-501-3186</a>), or chat with us via <a href="https://better.com/">Better.com</a> with any questions about your LE. We are happy to walk you through competing offers and answer any questions. No pressure, no sales — just a fast, easy and transparent process.</p>

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Your loan estimate is a summary of the terms and costs associated with your loan. Learn how to read and understand it with confidence.

A quick guide to your Loan Estimate

Blog post image for A quick guide to your Loan Estimate

<p><em>If you refinance or sell your home in the average time frame, taking lender credits to offset your closing costs (a.k.a. a no-cost mortgage) will save you money in comparison to paying points.</em></p>

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<p><br> <br />
“Taking credits” refers to the practice of accepting a higher interest rate (and therefore higher monthly payments) in exchange for cash to offset your closing costs. If you take enough credits to offset all closing costs, this results in a “no-cost mortgage.” </p>

<p>The flip side of taking credits is “paying points,” which means paying a percentage of your mortgage balance upfront in exchange for a lower interest rate and lower monthly payments. </p>

<p>The typical cost of changing your rate by 0.125% is 0.625% of your loan amount. So on a $400,000 loan, if you took a rate increase of 0.125%, you would receive $2,500 in credits. If you reduced the rate by 0.125%, you would pay $2,500 in points.</p>

<blockquote>
  <p>There are many factors that determine whether paying points or taking credits is right for you. However, perhaps the most important one is how long you keep your mortgage without fully repaying it by selling your home or refinancing.</p>
</blockquote>

<p>By taking credits, you will save money early on by reducing your closing costs. But there will be a time in the future when you will lose money (compared to paying points) by paying the higher interest rate. The gamble is whether you get out of your mortgage before the time when you break even.</p>

<h4 id="figureifyoutakecreditsyouwillsavemoneyearlyinyourmortgagetermbyoffsettingclosingcosts">Figure: If you take credits, you will save money early in your mortgage term by offsetting closing costs.</h4>

[![ Graph: Years on X Axis and Total Savings If You Pay Points on Y Axis](https://media.better.com/content/prod/2016/09/concept-take-credits.png)](https://better.com/start) <br />
<em><p style="font-size:1.4rem;">This graph illustrates the concept of taking credits.</p></em>

<p>By paying points, you will lose money at the start by paying the closing costs. But there will be a time in the future when you break even and start to save money by paying the lower interest rate. If you leave your mortgage before that time, you lose money. The gamble is whether you will stay in your mortgage long enough to reach the time when you break even. </p>

<h4 id="figureifyoupaypointsupfrontyouwilllosemoneyearlyinyourmortgageterm">Figure: If you pay points upfront, you will lose money early in your mortgage term.</h4>

[![ Graph. Years on X Axis and Total Savings If You Pay Points on Y Axis](https://media.better.com/content/prod/2016/09/concept-pay-points.png)](https://better.com/start) <br />
<em><p style="font-size:1.4rem;">This graph illustrates the concept of paying points.</p></em>

<h2 id="payingpointswasthewrongdecisionformostborrowers">Paying points was the wrong decision for most borrowers</h2>

<p>Historical data tells us that for most borrowers in the last 25 years, paying points has been a bad decision. Recent research using data from 1990-2015 found that on average, borrowers have kept their mortgages only five years (<em>Agarwal, Ben-David, and Yao (2016), Journal of Financial Economics</em>). </p>

<p>Historical data from Freddie Mac is consistent, showing the majority of borrowers have refinanced, sold, or otherwise closed their mortgage within six years.</p>

<h4 id="figurethemajorityofloansinthefreddiemacdatasethavebeenactivelessthansixyears">Figure: the majority of loans in the Freddie Mac dataset have been active less than six years</h4>

[![ Graph. Number of Years Since Origination on X Axis and Loans Still Active (%) on Y Axis](https://media.better.com/content/prod/2016/09/loans-active.png)](https://better.com/start) <br />
<em><p style="font-size:1.4rem;">Fraction of loans still active out of the cohort originated in any given year. For instance: out of the loans originated in 2008, less than 40% were still active four years later. The other 60+% had refinanced, foreclosed, or sold.</p></em>

<blockquote>
  <p>What this means is that those who paid points usually left their mortgages before the break-even line, and therefore lost money. Had they taken credits (or a no-cost mortgage) instead, they would have saved money.</p>
</blockquote>

<p>While you might think this finding is due to the time-period studied and interest rate trends over that time, the authors of the research also ran an ex-ante simulation. Given the break-even nature of paying points, those who paid points should have been less mobile on average (e.g., slower terminations for non-rate-based reasons) than those who did not pay points. However, the research concluded that points-payers did not keep their mortgages a statistically different amount of time than non-points-payers.  </p>

<h2 id="sowhenshouldyoupayforalowerrate">So, when should you pay for a lower rate?</h2>

<p>There are a few scenarios where it does make sense to pay out of pocket for points:</p>

<ul>
<li>You think it’s really unlikely that you will move or refinance for a very long time.</li>
<li>Your projected income is going down in the future, meaning you would not be able to qualify for a similar mortgage.</li>
<li>Your tax rate this year is much higher than what you expect in future years. You want to deduct as much as possible when your tax rate is high, and points are deductible against income in the year you get the mortgage.</li>
</ul>

[![ Got More Questions? Our Free Guide Has the Answers. Sign Up to Download](https://media.better.com/content/prod/2017/10/FTHB_adforblogB-1.png)](https://better.com/content/the-guide)

<h2 id="runyourownscenario">Run your own scenario</h2>

<p>In the end, whether to pay points or take credits is a complex question. Things you probably rarely consider (like your future marginal tax rate) affect whether you should pay points or take credits in your particular situation. To make it a bit easier, we’ve provided a calculator that will help you explore different scenarios and make your own determination.<sup id="fnref:1"><a href="#fn:1" rel="footnote">1</a></sup> </p>

<p>The projected break-even time will be your guide. If you are considering paying points, you should do so only if you have a high level of certainty that you’ll stay in the mortgage longer than that. You are confident you won’t move, sell your house, pre-pay your mortgage, refinance for a better rate, take cash out for renovations, etc.</p>

<p>If you think any of the above scenarios might happen sooner than that, taking credits is likely a better option.</p>

<div id="widget-element"></div>  

<script src="https://media.better.com/widgets/pay-points.js"></script>

<h2 id="getaratequote">Get a rate quote</h2>

<p>You can <a href="https://better.com/start">get a personalized rate quote</a> from Better Mortgage in minutes, without affecting your credit score. </p>

[![ A Better Mortgage Starts with Better Information. Get a Better Mortgage](https://media.better.com/content/prod/2017/05/blog_nocostmortg_CTA@2x-1.png)](https://better.com/start)

<p>Every rate quote will provide options for paying points and taking credits, including a no-cost option. Try it and see which option is best for you.</p>

<div class="footnotes"><ol><li class="footnote" id="fn:1"><p>The calculator is provided for demonstrative purposes only. <a href="#fnref:1" title="return to article">↩</a></p></li></ol></div>

Historical data tells us that for most borrowers in the last 25 years, paying points has been a bad decision.

Why a no-cost mortgage is better

Blog post image for Why a no-cost mortgage has historically been the best choice for most borrowers: try our interactive tool

Why a no-cost mortgage has historically been the best choice for most borrowers: try our interactive tool

![timeline hero](https://cdn.builder.io/api/v1/image/assets%2Fea37b90b89334a2ab1714e2159c75418%2F2441b26839fa46c1b6e11e127df42512)

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<p class="learnfont"><strong>What You’ll Learn</strong></p>

<p class="learnfont">The steps involved in the homebuying process</p>

<p class="learnfont">How long you can expect the homebuying process to take</p>

  <p class="learnfont">What your role will be in each step of the process</p>

  </div>
  <br><br>

You’ve been thinking about buying a home for months—maybe even years. Now that you’re ready, you’re probably wondering how long it will take until you get to pick up the keys. Of course, the time it takes to find a home you love is going to vary, but the average timeline to close a mortgage is just [42 days](https://www.elliemae.com/about/news-reports/press-releases/refinances-soar-as-30-year-note-rate-continues-to-decline-in-august-according-to-latest-ellie-mae-origination-insight-report#:~:text=About%20the%20Ellie%20Mae%20Origination%20Insight%20Report&text=The%20closing%20rate%20is%20calculated,months%20from%20application%20to%20closing. "external"). At Better Mortgage, our modern online process makes it even faster; our average closing time is just [32 days](https://better.com/with/claims). 

To help you know what to expect at each step along the way, we’ve laid out a typical timeline for a homebuying journey—along with some tips and insights to help keep things moving smoothly.  Here’s what you can expect.  

## Homebuying timeline

- [Mortgage pre-approval  – 1-3 days](#1)
- [Home search – 1-20 weeks](#2)
- [Make an offer on a Home – 1-2 days](#3)
- [Mortgage application – 1 hour ](#4)
- [Loan processing – 3-4 weeks](#5)

    - [Appraisal – 1-7 days](#6)
    - [Inspection – 1-7 days](#7)
    - [Title search & title insurance – 1-2 weeks](#8)
    - [Underwriting – 10-15 days](#9)

- [Closing disclosure – 1 day](#10)
- [Final walkthrough – 1-4 hours](#11)
- [Home closing – 1 day](#12)

<div id="1"></div><h2>Mortgage pre-approval: 1–3 days </h2>

<h4 class="subhead">(As little as 3 minutes with Better Mortgage)</h4>

While most homebuyers kick off their search by browsing listings online, it's smart to get [pre-approved](https://better.com/content/what-is-a-mortgage-pre-approval/) for a loan before you start going to open houses. This will help you determine your price range and give you more leverage when you’re ready to make an offer. Most sellers ask for a pre-approval letter as proof that you’ll be able to receive financing if your offer is accepted. In most cases, getting a pre-approval takes 1 to 3 days. However, with the Better Mortgage [online pre-approval](https://better.com/preapprovals/purchase) system, you can get your letter in as little as 3 minutes. 

First, we’ll ask you about your income and assets and do a soft credit pull (don’t worry, this won’t affect your credit score). Next, our technology will instantly match you with the best mortgage options available based on your information. And that’s it—you now have a free, no commitment pre-approval letter that gives you an accurate estimate of your homebuying potential.

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<div id="2"></div><h2>Home search: 10 weeks</h2>

Once you have a pre-approval letter in-hand, get ready for the fun part: house hunting. It’s time to start looking at listings and work with your real estate agent to pick the homes that catch your attention. Incidentally, if you need help selecting a qualified, knowledgeable real estate agent to help in your search, our affiliate at [Better Real Estate](https://better.com/realestate) can match you with a top agent in your area. Plus, if you work with a Better Real Estate agent and choose to finance with Better Mortgage, you could save $2,000 on closing costs*. This is just one of many ways we’re making buying your new home more affordable.

It’s hard to predict how long it will take to find the right home. You could very well get lucky and find your dream home on day one—or it could take several months. Ultimately, the timing will depend on several factors, like available inventory in your desired area and your specific preferences. The National Association of Realtors’ [2020 Generational Trends Report](https://www.nar.realtor/sites/default/files/documents/2020-generational-trends-report-03-05-2020.pdf "external") found that homebuyers typically look at around 9 listings over 10 weeks before they find the right one. 

<div id="3"></div><h2>Make an offer on a home: 1–3 days</h2>

Ok, so now you’ve found the one. From here, it may only take a few hours to discuss the terms of your offer with your real estate agent before it’s submitted. But, it’s after you submit the offer that the real nail-biting begins. Sellers aren’t required to respond within a specific period of time, but most will either accept, reject, or counter your offer within 24 to 48 hours. In cases of multiple offers or a foreclosure, things could take a bit longer. 

Communication mostly happens over the phone between buying and selling agents, so you’ll likely be waiting on your agent for the latest status updates. Once you hear back, you may have to negotiate back and forth on things like price, [contingencies](https://better.com/content/what-is-a-mortgage-contingency-and-why-is-it-important/), and closing date until you come to an agreement with the seller. 

<div id="4"></div><h2>Mortgage application: 1 hour</h2>

When the seller accepts your offer (congrats!), you’ll start the process of officially getting approved for your home loan. The application usually asks questions about the property and [occupancy type](https://better.com/content/primary-residence-second-home-or-investment-property-whats-the-difference/) as well as your employment history and finances. Within 3 days of submitting your application, a lender must provide you with a “[loan estimate](https://better.com/content/a-quick-guide-to-your-loan-estimate/)”—which is a standardized document that contains your monthly payment, interest rate, and other associated costs of your mortgage. 

From here, you’re ready to make the purchase official! First you’ll select the right home loan type and term and then [lock in your interest rate](https://better.com/content/why-locking-your-mortgage-rate-wont-box-you-in/). Then head through the processing and closing of your loan and onto owning your dream home.

PS: We’ve expedited the process at Better Mortgage, so you can complete your online application and lock your rate in as little as an hour—and we provide an instant loan estimate all the way back at pre-approval.

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![timeline graphic 3](https://cdn.builder.io/api/v1/image/assets%2Fea37b90b89334a2ab1714e2159c75418%2F15ea74bf4a434d6f9557ce11f0ca826a)
<p class="legal">*for illustrative purposes only, closing times may vary.</p>

<div id="5"></div><h2>Loan processing: 3–4 weeks</h2>

Once you’ve submitted your loan application, it moves into processing. In this phase, your lender will give you a [list of documents](https://better.com/content/what-documents-will-i-need-for-my-mortgage/) that you need to provide so they can verify all of the information you provided in your application. The quicker you submit them to your loan processor, the quicker your file will move along. 

Processing includes a few steps that often happen simultaneously, including your appraisal, inspection, title search, and underwriting. Here’s what to expect during each: 

<div id="6"></div><h4>Home appraisal: Up to 1 week</h4>

As soon as you pay for your appraisal and lock in your interest rate, your lender will order an appraisal. This is to determine the fair market value of the home you’re about to purchase—in other words, how much it’s really worth. Among other things, appraisers review recent comparable sales of similar homes in your area (aka “comps”) to determine the home’s true value. This report may take a few days to get back. An appraisal is important to ensure that neither you nor your lender are paying more than the home is worth.

<div id="7"></div><h4>Home inspection: Up to 1 week</h4>

A home inspection is a review of the overall condition of a home. It’s a worthwhile step because it can help you catch costly issues or needed repairs before moving forward with the sale. Depending on what’s found, you may choose to request repairs, renegotiate, or cancel the purchase agreement altogether.

If inspections are a part of your contingencies (meaning they’re required for the sale to move forward), these negotiations must take place within the timeframe listed in your contract—so it’s important to get these going as early as possible. The inspections themselves usually only take a few hours, but it can take several days to receive the reports back from the inspectors. Once you have them in-hand, you can determine how to move forward. Perhaps you want a broken window fixed or a handrail replaced—just make sure you know what repairs you’re willing to take on after the home is fully yours. 

<div id="8"></div><h4>Title search and title insurance: 1–2 weeks</h4>

While the inspectors and appraisers are busy with their work, your agent (or in some cases your attorney or loan processor) will order a title search and title insurance. In real estate, a title refers to the legal ownership of the home. A title search is done to ensure that the seller can transfer property ownership to you free and clear. Title issues can arise if there are any outstanding judgments or liens against the current or previous owners for things like unpaid child support or owed taxes. If potential issues are found, then the seller would be responsible for resolving those before the sale can move forward.

Title insurance is designed to protect you and your lender from exactly those kinds of surprises. [Better Settlement Services](https://better.com/title) can work hand in hand with Better Mortgage to ensure quick and transparent processing of your title insurance.

<div id="9"></div><h4>Underwriting: 10–15 days</h4>

While your title, appraisal, and inspection work is being completed, your lender will thoroughly review all the information you provided to verify that it is accurate. They’ll also calculate your [debt-to-income ratio](https://better.com/content/improving-your-debt-to-income-ratio-dti-when-applying-for-a-mortgage/) to determine the risk level of approving you for the loan. While this process usually takes around 10 to 15 days, it may take longer depending on your financial circumstances. For example, if you have multiple income sources, such as rental or interest income, or you are pulling your down payment from various asset accounts, or [through a gift letter](https://better.com/content/how-to-use-a-gift-letter-for-your-mortgage/), then it could take a little longer for an underwriter to verify all of this.

Once everything is accepted, you’ll receive a conditional approval. This means that you’ll be approved for a loan once certain conditions are met. These might include additional documentation, the sale of your current home, or results from an appraisal. When all the steps of the process are completed, you’ll receive a “clear to close” notice, meaning you’ve been fully approved and can move forward with closing—the last step before the home is yours! 

<div id="10"></div><h2>Closing disclosure: 1 day</h2>

3 days before closing, your lender must provide you a document known as a “[closing disclosure](https://better.com/content/a-guide-to-understanding-your-closing-disclosure/).” The 3-day window gives you time to compare your final terms and costs to those estimated in the loan estimate you previously received. The closing disclosure will contain the exact figures of your monthly mortgage payment, as well as how much it will cost to close on your loan. If you have any questions, this is the time to ask your lender before you go to the closing table.

<div id="11"></div><h2>Final walkthrough: 1–4 hours</h2>

Before closing, it is recommended you and your agent perform a final walkthrough. This is your chance to verify the home is in a satisfactory condition since your offer was first accepted. You should ensure all the correct appliances and fixtures are still in the home and that any negotiated repairs were completed. If there are any problems, your agent can help you get them fixed. If all looks great, then you’ll be ready to close. 

<div id="12"></div><h2>Home closing: 1 day</h2>

Congratulations! You made it to the last step of the loan process. During closing, you’ll be expected to sign paperwork. Then, your lender will transfer the funds to the home seller and initiate your loan, and you’ll (finally!) get the keys to your new home. The closing process usually takes an hour or two, but in some states, funding may happen a day or so after the closing date. After closing, you’ll officially be a homeowner. Time to celebrate!

Ready to start the process of buying a home? Visit Better Mortgage today to apply for a pre-approval. 

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<p class="legal">*See <a href="https://better.com/faq/rates/whats-the-fine-print-better-real-estate">Better Real Estate discount fine print</a>.</p>

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Explore our detailed home buying process timeline to understand each step from pre-approval to closing and learn how to move forward with confidence.

Home Buying Process | Step by Step Timeline

Blog post image for Your timeline for the homebuying process

Your timeline for the homebuying process

![A comprehensive guide to a second home loan](https://cdn.builder.io/api/v1/image/assets%2Fea37b90b89334a2ab1714e2159c75418%2F5fd9119897cd43f988df2db8824d200b)

 <br>
  <div class="learn">
<p class="learnfont"><strong>What You’ll Learn</strong></p>

<p class="learnfont">Second homes, or vacation homes, must meet specific guidelines to be eligible for a second home loan.</p>

<p class="learnfont">Second home mortgage qualifications are typically more strict than for a primary residence.</p>

  <p class="learnfont">Beyond a mortgage, several alternative financing options can help you pay for your second home.</p>

  </div>
  <br><br>
<h2 style="margin-bottom:24px;">Table of contents</h2>
<ul>
    <li><a href="#1">What is a second home mortgage loan?</a></li>
    <li><a href="#2">Things to Consider When Taking Out a Mortgage Loan for a Second Home</a></li>
    <li><a href="#3">Second home loan mortgage requirements</a></li>
    <li><a href="#4">Alternative ways to finance a second home</a></li>
    <ol style="margin-left:24px">
        <li><a href="#5">Home equity line of credit (HELOC)</a></li>
        <li><a href="#6">Cash-out refinance</a></li>
    </ol>
    <li><a href="#7">How to Buy a Second Home With a Mortgage: The process</a></li>
    <ol style="margin-left:24px">
        <li><a href="#8">Get pre-approved for a second home mortgage loan</a></li>
        <li><a href="#9">Work with a local agent</a></li>
        <li><a href="#10">Hunt for your new home</a></li>
        <li><a href="#11">Make an offer</a></li>
        <li><a href="#12">Close on your mortgage</a></li>
    </ol>
    <li><a href="#13">Get a second home loan with Better Mortgage</a></li>
</ul>
<br>

If there’s a special place in your heart you frequently visit, then you may be ready to ditch hotel rooms and rentals and buy a more permanent place of your own. Second homes can serve a variety of purposes, from vacation spots to practical dwellings in prime locations.

Here’s how second homes differ from other property types, how second mortgages work, and what you can expect from the buying process once you’re ready to get started.

<div id="1"><br></div>

## What is a second home mortgage loan?
A second home loan is a mortgage used to finance a secondary or vacation residence. 

Second home loans differ from those used for [primary residences and investment properties](https://better.com/content/primary-residence-second-home-or-investment-property-whats-the-difference/) because each property type represents a different level of risk for lenders. For instance, because you’re not dependent on your second home as a primary place to live, lenders assume you may be more likely to stop making mortgage payments if you fall on hard times. 

For a property to be [considered a second home](https://better.com/content/buying-a-second-home/) and deemed eligible for a second home loan, it must meet the following guidelines:

- The home must be a single-unit dwelling.
- The property must be suitable for year-round occupancy, even if you only intend to use it for part of the year.
- You’re required to have exclusive use of the property, meaning no long-term leases or timeshare scenarios.
- The home may not be under the control of a property management company.
- In most cases, it must be located a certain distance from your primary residence.

You may be able to rent out a second home when you’re not using the property, but rentals are typically restricted to 180 days per year. And any projected rental income cannot be considered for mortgage qualifying purposes.

[Unlike second property mortgages, investment property mortgages’](https://better.com/content/second-home-vs-investment-property) allow for even longer rental terms (year-round), but also come with the toughest qualifying guidelines because they tend to have higher delinquency rates than other occupancy types. Lenders will typically expect that you are truly using the property as a second home and not a full investment property that allows for tenancies longer than 180 days.

<br> <br>

 <div style="text-align: center">  
 <a class="bet-Button bet-Button--xl bet-Button--primary" href="https://better.com/start">Get started with Better Mortgage</a>  
 </div>

<div id="2"><br></div> 

## Things to consider when financing a second home
While [purchasing a second home](https://better.com/content/buying-a-second-home/) is an exciting adventure, financing requirements can be a bit more strict than those for a primary mortgage. Second mortgages also tend to come with higher interest rates because of the increased risk they represent to lenders.

<div id="3"><br></div>

## Second home loan mortgage requirements

Here’s what your typical mortgage requirements [qualify for a second home loan](https://better.com/content/buying-a-second-home/) are:

- At least 20% of the purchase price as a down payment
- A lower debt-to-income ratio, usually less than 43%
- A good-to-excellent credit score
- Proof of enough cash reserves to cover several months’ worth of mortgage payments

<div id="4"><br></div>

## Alternative ways to finance a second home
If you think it will be a challenge to get a second mortgage based on the requirements above, or you’d prefer a different way to pay, there are other alternatives to consider. These options will allow you to leverage the equity you’ve built up in your primary residence, and use it toward your second home.

<div id="5"><br></div>

### Home equity line of credit (HELOC)
A [home equity line of credit](https://better.com/content/when-and-why-would-i-need-second-mortgage) allows you to borrow against the equity from your primary home on an as-needed basis and pay it off with interest over time. It works similarly to a credit card where you can borrow up to a specified credit limit, and the amount gets replenished as you make payments. 

Keep in mind that because HELOCs are secured by your primary residence, your lender may be able to foreclose on your home if you stop making payments.

<div id="6"><br></div>

### Cash-out refinance
A [cash-out refinance](https://better.com/content/guide-to-cash-out-refinance) is similar to a traditional refinance in that you replace your current primary mortgage with a brand new one. However, with a cash-out refi, you tap into your current home’s equity to free up extra cash for your new second home. 

Of course, this will add to your existing mortgage balance by increasing the amount you owe, which may result in a higher mortgage payment. Also, when you refinance, you typically reset the payoff clock on your mortgage, especially if you’re getting a new 30-year home loan, so going this route for a second home may take you longer to pay off your first mortgage. 

<div id="7"><br></div>

## How to buy a second home with a mortgage: The process
If you decide to move forward with a second home loan, then here are the steps you can expect from the homebuying and mortgage process. 

<div id="8"><br></div>

### Get pre-approved for a second home mortgage loan
Before you start shopping around and going to open houses, you’ll want to confirm [how much you can afford](https://better.com/how-much-home-can-i-afford) with Better Mortgage to spend. A [pre-approval](https://better.com/content/how-to-get-pre-approved-for-a-mortgage) can give you an idea of the amount you’ll be approved to borrow. 

Not all lenders offer second home financing. But luckily, Better Mortgage does! With our online process, you can get pre-approved in as little as 3 minutes, without affecting your credit score. 

<br> <br>

 <div style="text-align: center">  
 <a class="bet-Button bet-Button--xl bet-Button--primary" href="https://better.com/start">Get started with Better Mortgage</a>  
 </div>

<div id="9"><br></div>

### Work with a local agent
Once you’ve been pre-approved, you’re ready to connect with a [Better Real Estate Agent](https://better.com/with/find-an-agent). Because you’ll likely be buying a second home in a different area from where you currently live, it’s a good idea to interview a few local agents. They should be able to answer your questions about various neighborhoods, traffic patterns, and local events and help guide you through your search.

<div id="10"><br></div>

### Hunt for your new home
After connecting with a [Better Real Estate Agent](https://better.com/with/find-an-agent), it’s time for the fun part: shopping for homes. Think about taking a trip to the area where you want to buy and asking your agent to set up multiple showings to make the best use of your time.

<div id="11"><br></div>

### Make an offer
Once you’ve found the perfect second home, it’s time to [make an offer](https://better.com/content/how-to-make-an-offer-on-a-home). You’ll work with your agent to decide how much to offer, draw up the paperwork, and negotiate with the seller. If your offer is accepted, you’ll be ready to move on to the last step in the process.

<div id="12"><br></div>

### Close on your mortgage
[Most homes close within 1-2 months](https://www.forbes.com/advisor/mortgages/how-long-does-it-take-to-close-on-a-house/ "external") of when the seller first accepted the offer. During this time, you’ll have any requested inspections, receive an appraisal report, complete your mortgage documentation, and attend a final walk-through.

Then, you’ll be ready to head to closing where you and the seller will sign paperwork and your lender will send over the necessary funds. At the end, you’ll be handed the keys and officially be the proud owner of a second home and you can close 10 days faster than the industry average with Better Mortgage.

<div id="13"><br></div>

## Get a second home loan with Better Mortgage
Buying a second home is an exciting opportunity. But before you dive in, it helps to know exactly how much second home you can afford. 

Our pre-approval process takes as little as 3 minutes and can give you the confidence to make an offer on your second home.

<br> <br>

 <div style="text-align: center">  
 <a class="bet-Button bet-Button--xl bet-Button--primary" href="https://better.com/start">Get started with Better Mortgage</a>  
 </div>

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