Chapter 7: How To Pick The Right Mortgage Lender

How to Pick a Mortgage Lender

A mortgage lender is a financial Institution or bank that issues mortgage loans. In the past, home buyers usually sought out lenders after finding a home to purchase. However, now , real estate agents usually encourage home buyers to begin working with a lender prior to shopping for a new property. There are two main reasons for this:

Setting a target price range: Because lenders will inform you about the amount that they are willing to loan to you, you will be more prepared to search for a property with a specific price range in mind.
Preapproval: Typically, sellers prefer selling to buyers that have been preapproved for a loan. If you are preapproved for a loan, you will have more influence in negotiating with the seller than if you were not preapproved. You will also be more prominent if you enter a situation where you are bidding along with numerous other buyers. For more detailed information on the process of being prequalified and preapproved, please reference The Mortgage Application Process.

How to Find a Mortgage Lender

You can obtain a mortgage lender either by yourself or by going through a mortgage broker, an expert in the area of locating lender for people looking to buy homes.

By Yourself: Dealing with a lender directly is usually a fine . If you choose to take this route, make sure to visit and evaluate several potential lenders. The mortgage field is a fairly unregulated industry, so if you come across a lender that doesn’t seem completely honest, continue on to the next lender. If you are not comfortable with finding a lender by yourself, either use a broker to assist you, or choose to work with big-name banks that are known for providing mortgage loans, like Wells Fargo, Countrywide Financial, CitiMortgage, or Washington Mutual.
Through a Mortgage Broker: It is often helpful for first-time home buyers or buyers with unusual circumstances (like severe credit problems) to work with a mortgage broker. Not every broker charges fees to borrowers-those who do charge fees usually charge a commission of 0.5%-2% of the loan principal. Brokers who do not charge fees from the borrower receive a commission from the lender, which typically necessitates that the lender slightly raise the loan rate. When working with a broker that charges a commission-based fee, you should never pay more than 1%. To locate a mortgage broker in your area, use the yellow pages, search online, or ask you real estate agent.

Searching for a Lender Online

Website like E-Loans (www.eloans.com) and Lending Tree (www.LendingTree.com) offer services that match borrowers with nationwide lenders free of charge. Although these services can be useful, it is almost certainly wisest to stay away this from as a first-time home buyer- when you are new to the process it is smarter to work directly with a lender.

What Should You Look for in a Mortgage Lender?

When seeking out a lender, try to acquire one that offers the most ideal blend of the subsequent features:

Highly Regarded: Only work with lenders who demonstrate a serious dedication to assisting you through the process. If it feels like the lender only wants your money, move on to the next lender. Good follow-through is also very important-stay away from lenders who dodge questions or neglect to reply to your requests in a timely fashion. Request that the lender provide you with references from previous clients, unless you were referred to the broker by someone that you trust.
Rates: Do not select a lender based solely on its advertised rates- because these rates depend on your individual circumstance, the rates that you receive will probably be different from the advertised rates. Alternatively, you should select a lender that proposes sensible rates that are reasonable compared to other lenders.
Fees: Virtually all lender charge an origination fee (typically 0.5-1% of the loan’s principal) to cover the expenditures that they suffer to evaluate your creditworthiness and process your loan. Those lender who do not charge origination fees generally present higher interest rates in order to offset their costs.
Specialization: The lender that you pursue should specialize in the particular type of loan that you want, with an array of options, like choice of terms, interest-only options, balloon loans, and so forth.

What to Tell Potential Mortgage Lenders

When visiting a lender face-to-face, it is valuable to be aware of what you should say and what you should not disclose. As a general rule, you should explain the essentials of your circumstance without divulging too much detail.

Tell the lender: The kind of home that you are contemplating (like a single-family house, or a three bedroom condo), in addition to your financial status, including your credit score, you income, and the savings you have on hand for a down payment and initial expenses. With all of this data, the lender should be able to provide you with the information that you require.
Do not tell the lender: The maximum budget that are thinking about for the home and, thus, the amount of the loan. You may also choose to shun away from revealing your credit score right up front-unless it is very good-because you do not want to discourage a lender from considering you based only on your credit score.