5 Tips for Choosing a Mortgage Lender

3. Talk to multiple lenders.

While speaking to one lender may be easier, you should cast a wide net. A better fit may be available, but you won’t know until you talk to several companies. Ask each whether they service their own loans or sell them, how you can reach customer service and what sort of online or mobile account access they provide.


4. Compare both rates and fees.

Home buyers are often focused on interest rates, but fees can quickly add up. As you talk to lenders, ask whether they have application or origination fees. Sometimes, the advertised rate can also assume you are buying points, which can increase closing costs.

5. Go through the preapproval process.

Most lenders offer a preapproval process, allowing you to receive an estimate of your costs and interest rate. Preapprovals are non-binding, and you should get preapproved through several lenders so you can better compare numbers. One caveat: a preapproval could reduce your credit score by a few points if it involves a hard inquiry on your credit report. However, some mortgage companies use what’s known as a soft pull to check credit that doesn’t impact your score.

How To Find the Best Mortgage Lender

It is easier than ever to find a mortgage lender. Mortgage rates are readily available online on lender and rate aggregation sites, and many lenders aggressively post ads with their rates as a way to draw you to their website.

The banks or credit unions where you have accounts are good places to start on your mortgage loan search, as they might offer special rates and fees for customers.

Finally, talk to friends and real estate professionals for references—they might be able to suggest a lender or broker that they’ve worked with and can recommend.


How To Prepare

Before you start applying and seek mortgage pre-approval, make sure you’re financially ready to take on a loan and get the best rate possible.

You’ll want to prepare for your mortgage application by:

Checking and improving your credit score. Check your credit score at least several months before you apply for a mortgage and work on improving it. Paying off credit card balances, making sure you make payments on time and not taking out loans or opening multiple credit cards will help you build a higher score or maintain a strong one.

Saving for your down payment. Although a down payment of 20% or more is ideal, you can get loans for as little as 3% down as long as you can effectively cover the monthly payments.

Ensuring your income is stable. Lenders want to make sure you have enough income to afford the monthly payments now and in the future.

Key Questions To Ask a Mortgage Lender

Before you select a lender and complete your mortgage application, here are some questions to ask:

How long do you expect the process to take?

Will you be my main contact throughout the process, or will someone else take over when it goes to underwriting?

How will we keep in touch?

Which steps will take place online and which will occur in person (such as appraisal and closing)?

How long of an interest rate lock do you recommend? If the closing doesn’t take place before that date through no fault of my own, will I have to pay for an extension?

How To Compare Mortgage Loan Offers

Before you settle on a winner, it’s important to compare interest rates and fees offered by at least three lenders and/or brokers so you can be sure you have the best deal. Here are a few ways to compare the offers:

Interest rate. This is the most obvious way to choose between lenders, but it shouldn’t be your only determining factor. Keep in mind that rates change daily, so you’ll want to be sure you have the right lender before you lock in a rate and finalize the application. Also ask about points, which are fees that may allow you to get a lower interest rate. Find out how much they cost and whether you need them at all.

Fees. There are a variety of fees associated with a mortgage loan. Not all of them are clearly understandable. Some lenders might list the fees individually while others lump them together. Ask about all of them—including application fees, underwriting costs and others that are charged at closing. Compare between lenders and negotiate as many of the fees as possible.

Down payment and mortgage insurance. You’ll want to put down as much money as possible on a mortgage loan, but also make sure you’re saving for the inevitable home expenses—such as repairs and furnishings—for when you move in. For that reason, work with the lender to see if there are any down payment assistance programs that can help you get the loan without stripping your savings, especially if you are a first-time homebuyer. If you put down less than 20%, you’ll likely need to pay private mortgage insurance (PMI).

Once you decide which offer is best for you, complete the application. As long as you have your paperwork in order and there aren’t any financial issues that arise before closing day, you’ve likely been through the toughest part of the mortgage process. You can look forward to signing your loan documents at closing and moving into your new home.


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