Timing is Everything: When is the Right Time to Apply for a Mortgage?

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Credit Sesame discuss the right time to apply for a mortgage.

Good timing can make a big difference in life. This is certainly true of buying a home and getting a mortgage loan. While many matters in this process are out of our control, carefully determining when to shop for a mortgage, apply for financing, and close on a loan may reap benefits.

Learn what the experts have to say about the ideal timing when you decide to buy a house and apply for a mortgage.

Why timing can be important when financing a home

Mortgage interest rates have increased in the first half of 2022. That makes some prospective home buyers wish they would have pulled the trigger earlier. But the truth is that it’s impossible to predict mortgage rates and where they will land in the future. Trying to perfectly time the rate market can lead to frustration and disappointment.

Still, with proper advanced planning, you may be able to position yourself into a better mortgage loan deal and apply for a mortgage at the best time.

“The timing of your mortgage application will help you manage a couple of competing factors,” explains Martin Orefice, CEO of Rent To Own Labs. “First, especially in the current market, interest rates are going up all the time. With this in mind, applying earlier than anticipated is usually a better idea.”

Additionally, it’s wise to get pre-approved for a mortgage loan well before you start making offers on homes.

“The time of the month when you shop for loans and apply for financing can also have an impact,” he adds.

Also, if you expect mortgage interest rates to rise soon (current trends and the Federal Reserve’s plans to raise interest rates as the year progresses suggest that this is a foregone conclusion), it makes sense to time your home buying and financing plans carefully with the goal of acting sooner versus later. Wait too long and you may end up paying a higher interest rate and a higher home sale price.

The best time to begin shopping for a mortgage loan

Herndon Davis, a mortgage loan officer/broker in Fort Lauderdale, Florida, believes the best time to start shopping for a mortgage loan is four months before you begin home hunting.

“That’s because you must devote one solid month of research and due diligence figuring out which lender to choose – whether it’s a bank, credit union, or mortgage company,” he says.

This four-month timeline enables you ample time to save up for the down payment, closing costs, and cash reserves needed after you move in.

“Some lenders require a strict six months of cash reserves,” Davis notes.

After month #1, you’ll need the remaining three months to demonstrate financial responsibility and prudence.

“To prove your creditworthiness, your lender will want to see pristine bank statements with no outrageous cash deposits or withdrawals that cannot be easily explained away, he adds.

Starting plenty early can also give you time to work on improving your credit, if needed, notes Eric Jeanette, owner of Dream Home Financing in freehold, New Jersey.

“Once you are confident that you can qualify for mortgage financing, you can begin rate shopping,” Jeanette suggests.

The best time to apply for a mortgage

It’s wise to start the mortgage application process at the beginning of the month, the pros concur.

“The end of the month is always chaotic, with last-minute closings and rejected files getting last-minute approvals. You don’t want to get caught up in that rushed monthly madness,” cautions Davis. “I recommend applying for a mortgage loan between the third and fifth of the month if possible, making sure you provide all the necessary documents. Also, give yourself breathing room to get pre-approved by the 10th to 15th of the month – before the end-of-the-month rush.”

Consider that the start of the month is when lenders are most hungry for new business, Orefice points out. You’ll likely find that loan officers and processors are more eager to return your phone calls and carefully review loan options and terms with you earlier in the month versus later.

“However, the time of the month when you apply for a mortgage should have no impact on the deal, terms, or rate you are ultimately offered from a lender,” explains Jeanette.

In other words, the main benefit here is that you’ll get more personalized attention from lenders if you start the application process earlier in the month.

The best time to close on a mortgage loan

Want to save on closing costs? It can be best to close on your mortgage at the end of the month.

“Closing costs will often include a prorated charge for homeowners insurance, property taxes, and interest based on how many days are left in the month. So closing on or close to the last day of the month will keep these fees down,” Orefice continues.

Jeanette seconds those sentiments.

“If you close on the first day of the month, for example, you will owe about 30 days of interest. But if you close on the last day of the month, you will owe only one day of interest,” he says. “Therefore, the timing of when you close could have a significant impact on how much you will owe at the closing table.”

Adjustable-rate mortgages: Another way to time the market

In this era of higher interest rates, you might want to consider an adjustable-rate mortgage (ARM). This type of home loan usually starts with a lower rate than a fixed-rate mortgage; a few years later, the rate can change. ARMs are generally 30-year loans that span two specific phases: a fixed-rate period in which the interest rate stays the same (often lasting five, seven, or 10 years), and a second phase in which the interest rate can increase or decrease depending on market trends.

“You can pursue an ARM and then time it to refinance your loan or sell your home before the adjustable phase kicks in,” advises Davis.

You may also be interested in Guide to Buying a House and Getting a Mortgage.

Disclaimer: This guide to buying a house and getting a mortgage is for informational purposes only and is not intended as a substitute for professional advice.

Erik J. Martin
Erik J. Martin is a Chicago area-based freelance writer and public relations expert whose articles have been featured in AARP The Magazine, Reader’s Digest, The Costco Connection, The Chicago Tribune, Los Angeles Times and other publications. He often writes on topics related to real estate, business, technology, health care, insurance, and entertainment.

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