As a home buyer, you’ll be shopping for more than a house. You’ll also be shopping for a mortgage. Finding the right lender can save you money and stress, but first you have to know what you’re looking for — and how to find it.
Who’s going to loan you this money?
There are three main types of lenders you’ll want to think about:
Traditional bank: An FDIC-insured institution will sometimes offer you a discount if you have your checking or savings account with that bank. They can either keep the loan or sell it on the secondary market. Furthermore, you’ll deal with a loan officer who gets a base salary and most likely some sort of commission or bonus for writing your loan.
Mortgage bank: These banks don’t offer anything but mortgages. They may keep your loan or sell it. Our agents say if they sell it, they may sell the complete thing, including the servicing rights, which means you’ll be dealing with a whole new company. Or they could sell the loan but maintain servicing or keep the whole thing. Furthermore, you’ll also end up dealing with a loan officer who a majority of the time gets a salary and commission.
Mortgage brokers: Why would you use a mortgage broker instead of dealing directly with a lender? Because brokers can shop across many banks to find you the best rate. They are paid a commission known as a “yield spread premium.” You’ll be able to see just how much that is in your loan estimate.
Don’t Be Afraid To Shop Around
Friends and family may have exceptional recommendations, and there is a high chance you have real estate agents and brokers who can easily suggest one to you/ But don’t stop there. By getting a handful of quotes from a variety of lenders, you can easily sort by whatever matters to you the most: APR, interest rate, monthly payment, lender fees, lender rating and more. If you have a pretty good idea of your credit score, the results should be very accurate.
Don’t just assume you know what rate a lender will offer based on an advertisement that isn’t specific to you. Our Real Estate Agents say rates are heavily influenced by your credit score and other personal factors, so until the lenders you are considering actually take a look at your financial picture, there’s no way to know what they will offer.
You may be worried about having lenders “pull your credit” when shopping for a mortgage. After all, credit inquiries lower your credit score, so a slew of them could tank it, right? Fear not: The credit scoring companies realize you probably are not going to take out five mortgages all at once. As a matter of fact, a handful of mortgage-related inquires made within a single 14-day period count as just one for the purposes of your credit score.
Our realtors recommend you go ahead and apply with as many lenders as you have the patience for. Within three days of applying, you should get a loan estimate, in writing. You can use these to compare costs. Once you have some decent quotes, it doesn’t hurt to check with your bank or credit union to see if they can match or beat the other offers.
And of course, remember the 14-day grace period applies only to mortgage inquiries. This is not the time to begin applying for new credit cards!
Make It A Bit More Personal
Whether you contact a broker or go directly to a mortgage lender, pay attention to how they respond when you initiate contact. Can you talk to a real person who will give you a name and number to call back with more questions? Are they polite, helpful and quick to reply? Make sure to understand if they honor the quote you saw online or do things suddenly start changing when they’ve got you on the line?
This is also the time to assess their expertise. Are they happy to help explain your different choices and educate you on the process, or are they impatient? Do they initiate a discussion about your timeline or how and when to lock in a rate? Do they explain how or when rates will change?
And, importantly, do they take the time to get to know your situation and your needs? There are a lot of different loan products out there, and a good lender will be able to suggest one to fit your needs, even if it’s not what you originally asked about.
Of course, there are a few questions you should ask every potential lender:
- How much time do you need to complete the mortgage? (A lender who needs 60 days won’t be much use to you if you need to close in 45.)
- When can I “lock” my rate?
- How much are discount points and should I consider them?
- What are my options with fixed or adjustable-rate mortgages?
- When will my monthly payment be due?
- How much will my monthly payment be?
- What are the closing costs associated with the mortgage?
- Who do I talk to if I have an issue once the mortgage closes?
- Is there a penalty for prepaying my mortgage?
All of those should be answered in your loan estimate, but your broker or loan officer should be able to tell you informally over the phone as well. Whether it’s a broker or a loan officer at a bank, always remember you are dealing with a salesperson trying to sell you their loan product.
If the lender isn’t providing good customer service when they are trying to make the sale, things probably won’t be any better once you’re too far down the road to switch lenders and still meet your closing deadline. You want someone you can seamlessly reach to with questions and who will quickly return calls when they are not around. Your Main Job
Our realtors often say tat just as you want a lender who is responsive and forthright with numbers and figures, you have to keep up your end. When they ask for more income verification or other documentation, get it to them quickly. If it’s not immediately accessible, let them know when to expect it.
Finally, our real estate agents recommend you don’t try to mess up your numbers early on to see if you can get a better rate. They will pull your credit. They will require income verification. Our experienced real estate agents highly suggest you save everyone, including yourself, a lot of time and frayed nerves by being honest and upfront. If you have issues on your credit report that you can explain, do so, and ask the broker for advice on how best to deal with it. Sometimes just a letter explaining the circumstances can help you get a loan approved if it’s on the bubble.