How an app can help you get a mortgage
You may not be applying for a mortgage from your smartphone just yet, but it can help you out big time during the homebuying process.
Don Frommeyer, president of the National Association of Mortgage Brokers, says that apps came onto NAMB members’ radar in late 2011 and early 2012.
“When I started in this business you had a beeper,” Frommeyer says. “If you were going to run errands, you always had to have quarters in your pocket to call back to the office.”
Apps, he says, are making the mortgage process faster and easier for both borrowers and the lenders. You can do everything from keep track of your credit score to find rates to see how much faster you’ll pay off the mortgage if you toss an extra $50 onto your monthly payment.
Before you start the mortgage hunt
To qualify for the lowest possible interest rate on a mortgage, you must have a stellar credit score.
A big piece of that puzzle is your FICO score. That score is used by 90 of the top 100 largest U.S. financial institutions to make consumer credit decisions, according to a spokesperson from the Fair Isaac Corp., which creates the scores.
Fair Isaac created the myFICO mobile app, which is free to download, but that’s about it. For it to track your FICO score, you must sign up and pay for a FICO monitoring service. Also, the app isn’t yet available for Android platforms.
A truly free option is Credit Karma, which gives you real-time feedback of your financial health, including a credit score. However, this score is a VantageScore, not a FICO score. A VantageScore is a rating system created by the three major credit unions, while FICO is the older and more established credit rating system. Plus, you only see one score — from the credit bureau TransUnion — not all three.
Still, if you’re trying to get your financial house in order pre-mortgage, Credit Karma can track your progress in areas like credit utilization and percentage of on-time payments. It will also point out any negative hits on your TransUnion credit report, which you can then have removed if they’re added to your report by mistake.
If you have a Discover Card, you already get your FICO score via TransUnion on your monthly statement. You can access that statement through their Discover Mobile app, too.
A mortgage is only one cost of owning a home. Homeowners insurance and property taxes are two more big annual expenses. In addition to showing you home prices in your area, real estate apps like Realtor.com’s Real Estate App can give you a property’s last five years of property taxes. Realtor.com’s app can also show you property tax trends so you can plan for future increases.
In the hunt
Calculator apps can help you play around with numbers and see what makes a difference. Bankrate’s Mortgage Calculator app lets you put in the loan amount, term of the loan, interest rate, property taxes, homeowners insurance, private mortgage insurance and any HOA fees. Then it calculates amortization, which is what the loan will cost over the life of the loan — including interest.
Bankrate’s app also lets you shop for mortgages — nationally and locally — by using your ZIP code. Even if you don’t contact a lender through the app, it shows you a range of what’s being offered for the type of loan you’ll need.
Having this information handy can also help if you’re negotiating with a loan officer at a bank or credit union where you’d really like to take out your loan, says Albert Williams, an associate professor of finance and economics at the H. Wayne Huizenga School of Business and Entrepreneurship at Nova Southeastern University.
“Like buying a car, you can show a banker that you will qualify for a loan with a lower interest rate at another bank,” he said.
Your lender may also make an app available to you so that you can track the loan process as it’s happening, and even use the camera on your phone to upload pictures of important documents. One such app is LoanSquatch. It’s free to borrowers and your Realtor — the loan originator pays the fee.
This, of course, assumes that your loan originator offers the app and this service, which is more likely now: As of June 6, NAMB members get a discount, which means it’s cheaper for them to offer the service to you.
After you’ve unpacked
After you move in, the next step — aside from unpacking — is to start paying that money back.
That’s where, most likely, your lender’s app can come in.
“They already have their money. They already have a relationship with them,” says Jennifer Kent, senior analyst at Parks Associates, of banks and customers.
Even if you didn’t use your phone in any other part of the mortgage process, you may to pay it back, even if it’s just a reminder. According to the Federal Reserve, 24 percent of all mobile users have used their phone to pay a bill. Of those, 53 percent received email alerts from their bank and 43 percent received text message alerts.
This is why a loan provider’s mobile app with bill pay may be appealing, though you’ll usually need to set up the service from the lender’s website.
Know what you’re giving up in return
Just because you can use all these applications doesn’t mean you should, says Williams.
“I support apps, but they have to be used carefully when very personal information is required,” Williams says.
Before you put an app onto your phone, Williams suggests figuring out what the app asks for in return.
- What personal information are you required to share?
- Are you required to give the app access to your phone’s contact list?
- Does the app need to track your location?
- Can you turn off some of those capabilities?