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When choosing the best mortgage lender, consider the following factors:
1. Interest rates: Compare rates from different lenders to find the most competitive option.
2. Loan options: Look for lenders that offer a variety of loan programs to meet your specific needs.
3. Reputation: Research the lender’s reputation and customer reviews to ensure they have a track record of good customer service.
4. Fees and closing costs: Understand the fees and closing costs associated with the mortgage to determine the overall affordability.
5. Customer support: Evaluate the lender’s customer support and communication channels to ensure they are responsive and helpful throughout the mortgage process.
By considering these factors, you can make an informed decision and choose the best mortgage lender for your needs.
Even if you have a good understanding of how to make wise financial decisions for yourself and your family, selecting the right mortgage lender for your new home purchase can be an intimidating task. This is especially true if you’re a first-time home buyer and aren’t quite sure where to start.
Although there’s a plethora of information available online that can aid in your search for the perfect lender, don’t underestimate the importance of personal interaction. This can go a long way in helping you form an opinion about potential mortgage lenders.
Steps to Evaluate Mortgage Lenders
Before making a final decision on which mortgage lender to work with, it’s important to conduct a thorough evaluation of several lenders. Seek referrals from family, friends, and your real estate agent, and read online reviews.
However, online research, emails, and texts are not enough. You should also have a telephone conversation or an in-person meeting to get a better feel for lenders. This will help you form an intuitive first impression. Plus, you can’t evaluate a loan officer’s tone of voice or inflection through these methods.
Speaking to someone directly during the lender evaluation process is crucial because hearing someone’s voice may rule in or rule out a prospective candidate. Loan officers should be knowledgeable about the loan products they offer and the best fit for you. They should also be courteous and patient when answering all your questions.
Questions to Ask Mortgage Lenders
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The Federal Trade Commission (FTC) has a mortgage shopping worksheet available for download. This two-page worksheet includes questions to ask prospective lenders and provides space to enter answers from two lenders. If you want to evaluate more lenders, you’ll need to use two worksheets.
The FTC worksheet covers various areas, including mortgage terms, closing costs, discount points, down payment requirements, interest rate lock-in details, interest rate, and annual percentage rate. It also includes questions geared towards specific types of mortgages, such as fixed-rate versus adjustable-rate mortgages, and whether a lender offers ​Federal Housing Administration (FHA) loans, Veterans Administration loans, and conventional mortgages.
If you’re looking for an adjustable-rate mortgage, the worksheet prompts you to enter details such as the initial rate, the maximum rate, and the payment caps each year as well as over the life of the loan. The worksheet also addresses mortgage fees and costs, such as credit report fees, application fees, and appraisal fees.
Aside from the questions on the worksheet, you may want to ask general questions such as:
Questions to Ask Your Mortgage Lender
- Do you have a state license?
- What is the estimated timeline for the mortgage process?
- Will you be my primary contact throughout the process?
- How much of the process can be done online?
If you’re considering mortgage brokers, ask the following:
- Who are your top lenders?
- How are you paid for brokering mortgages?
- What is your profit on my loan?
Mortgage Lender Types
Direct lenders include banks, credit unions, and savings and loans. Mortgage brokers connect borrowers and lenders without lending the money. Correspondent lenders fund mortgages, then sell them to secondary lenders. Wholesale lenders work with third parties to fund loans. Portfolio lenders are community banks and credit unions that fund mortgages from depositor accounts. Private investors fund mortgages with high interest rates and fees.
Pros and Cons of Mortgage Lenders
Choosing a traditional lender like your bank can be beneficial due to established relationships and a chance to negotiate lower rates. However, a bank may not have the best rates. Online forms are convenient for some borrowers, but online mortgage companies may not be available in some states, and not all mortgage products are available online.
Mortgage brokers can help find the best rates and mortgage products from various lenders that are tailored to each borrower’s needs. This makes it easier for borrowers who are looking for affordable mortgage payments to find the best deal. However, brokers may not work as hard unless they are under contract as the exclusive agent. Additionally, if the lender does not pay the broker commission, the fee will be passed onto the borrower.
Since a mortgage is a product, it’s important to shop around and compare rates, fees, and other costs before negotiating loan terms. If using a broker, ensure they negotiate with lenders on your behalf. Seasoned professionals can also help those with less than desirable credit scores find ways to lower their debt-to-income ratio and/or find a mortgage product that suits their financial situation. By doing the necessary research, borrowers may be able to save a significant amount of money.