When you buy a home, you’re in for a long-term commitment. You’ll have a mortgage payment for 15 to 30 years, so it’s smart to find the perfect mortgage lender for your requirements. Consider the following tips when making your decision:
Decide what kind of lender you want – small or large. If you prefer a more personal touch and a lender who will know your name you will more than likely want to go with a smaller lender. If you are the type of person that cares more about the interest rate, a large lender may be your best bet.
Talk to your real estate agent. A top-notch agent will not limit their recommendations to their in-house lenders. And most importantly, savvy loan officers take especially good care of clients that are recommended by real estate agents. So definitely use this to your advantage. This personal connection can be a big help when it comes to reducing closing costs.
Know your potential lenders. The competition between lenders is fierce so it’s best to know what’s available. I highly suggest going local. Online lenders are plentiful, but a local company comes with the added benefit of knowing the neighborhoods, properties and the real estate professionals in your area. Here are the most common lenders you can choose from.
· Credit Union: Member-owned, offering favorable interest rates to their members.
· Mortgage bankers: These are bankers who work for a specific financial institution and package loans for the banks underwriters.
· Correspondent lenders: These types of lenders are often local mortgage companies that fund your loan but rely on other lenders such as Wells Fargo, Chase and others to sell your loan to as soon as it is funded.
· Savings and loans: These institutions were once the base of home lenders but are now very hard to find. S&Ls are smaller institutions that are very community-oriented and worth speaking to.
Always compare rates from several lenders. This is where your homework begins. As I noted above there are many lending options – neighborhood banks, commercial banks, credit unions and online lenders, so you have many options to consider.
Once you have several quotes, compare the rates and costs and decide which makes the most sense for you. Don’t forget, everything is negotiable so make sure you have the best rate available because a low rate can save you thousands of dollars over the life of the loan.
Think beyond the dollars. Keep in mind that finding a mortgage lender involves more than just obtaining a good interest rate. Make sure the company is staffed by professionals who will effectively steer you through the entire process. Choosing a lender that displays honesty, integrity and are committed to making you the best deal possible is of utmost importance.
Narrow your choices by asking your friends, family or even your real estate agent for referrals. Once you have some options make sure you ask them the right questions:
· How do you communicate with your clients – email, text or phone? And, how quickly do you respond to your messages?
· What are your turnaround times on preapprovals, appraisals and closing?
· Ask what fees you will be responsible for at closing and can any of those fees be rolled into the mortgage?
· Don’t forget to discuss the down payment requirements
Get Your Credit Score in shape, as it will largely determine the terms of your mortgage. The higher your credit score the more power you will have to negotiate better rates from your potential lenders.
It will be important to make sure your credit reports are accurate. Get your report from the three major credit bureaus: Equifax, Experian and TransUnion. Remember, they are required to provide you with a free copy of your credit report every 12 months.
Try to pay off your high-interest debt in an effort to lower your overall level of debt as quickly as possible. This will improve your debt-to-income ratio. Also, paying off credit cards and unsecured loans before you buy a home will free up more funds for the down payment.
Always read the fine print. Payments on a mortgage are not the only costs associated with homeownership. Make sure you ask your lender to line out all the additional costs – closing costs, points, origination fees and any transaction fees there might be. Ask your lender for an explanation of each cost.
Always examine the fine print of all your loan documents, especially the Loan Estimate and Closing Disclosure. These documents will tell you the exact finance rate, who pays the closing costs, contingencies, closing date and many other important details.
Just remember, there are throngs of mortgage lenders ready to accept your application. Just because a lender accepts your application doesn’t mean they’re the right option for you.