Shopping for just the right house is an enormous task, but most prospective home buyers realize that doing some research, engaging the help of a licensed real estate agent and having a clear idea of "wants" versus "must haves" goes a long way in successfully maneuvering the home-buying process. But when it comes to mortgage lenders, a surprising number of home buyers fall short, failing to do the proper homework.
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Your mortgage lender is your collaborative partner in the home-buying process. A good mortgage lender should be able to qualify you for a loan program, as well as offer advice on how to improve your credit standing and ensure you feel comfortable with your new monthly budget. You will want a lender who can discuss your mortgage payment options in the context of your overall financial picture and lifestyle goals.
Here are three steps to take in choosing a mortgage lender that will help ensure your financial partner is a good fit:
1. Check Interest Rates
One of the first steps in choosing a mortgage lender is also probably the most obvious one: check interest rates. Identify a few banks and mortgage companies, and get some rate quotes. But keep in mind that choosing your mortgage lender involves more than simply identifying the lowest interest rate. So, after contacting a few lenders and getting some quotes, plan to follow up with some additional research and interviews as you move through the lender selection process. In addition to analyzing differences in mortgage rates, you will want to check on a lender's experience and reputation for moving loans along toward completion without unnecessary delay.
You may want to consider your existing bank or credit union, but do not expect any sort of incentive or break just because you are an account holder. Some financial institutions will give account holders some sort of break; others will not. You may want to consider referrals from friends and family, particularly those who have recently gone through the home-buying process. Most Realtors can also put you in touch with a competent mortgage lender.
2. Interview lenders
Be ready to ask a prospective lender about turnaround times, as well as details of loan programs available to you. You wil also want to ask who will be servicing your loan once the property has closed.
It is important your lender be able to communicate knowledgeably about home mortgage loan options that could fit your particular situation. This is something you can start to research even before applying for a loan. Ask a prospective lender about the programs he or she offers, and pay close attention to how at ease they are as they describe your options. If a lender is difficult to reach, seems less-than-knowledgeable about programs offered or focuses on trying to sell products rather than suiting your individual needs, be ready to move on to another lender.
3. Compare mortgage programs
Even if you believe you have a good handle on available mortgage programs, ask your prospective lender for written documentation or spreadsheets comparing loan programs. Restrict your comparison to the interest rate, points on a loan and any lender fees. Once you have this information, consider the differences between programs in the context of your financial goals, such as paying off the loan as quickly as possible or keeping monthly payments as low as possible.
Your ultimate goal is to get to the settlement table with your financing in place and a monthly payment that does not stretch your budget. Making that journey with a lender of your choice who works hard on your behalf will make the road a smoother one.
About the author: Lori W. is an active Realtor in Central Kentucky and has 20 years of experience in marketing and communications for a variety of clients, including real estate brokers, mortgage lenders and property investors