It’s not just about getting the lowest interest rate mortgage loan. You should also make sure that you feel comfortable with the company who originates the loan.
While many aspects of the mortgage process are similar across lenders, there are differences that could affect your fees and the quality of service that you receive. This is something that you should consider when shopping around.
What are the best places to get a mortgage?
A handful of companies can help you obtain a mortgage loan. A local bank branch that has a savings account, an internet lender or a broker who works with multiple lenders might be an option.
Loan originators will accept your mortgage application and guide you through the entire process from initial submission to closing. After you have closed on a mortgage, it is possible that the loan originator will sell the loan to another company. This company will then be responsible for collecting your payments.
Traditional Banks
Banks offer mortgage loans as part of their portfolio of services. They also offer checking and saving accounts, loans of various types, and investment services.
Online or in-person applications are accepted. A loan officer will be assigned to you. This option might be preferred if you have an account at the bank and wish to receive personal service from a local bank branch or a smaller institution.
Credit Unions
More than 5,100 federally insured credit cooperatives are located in the United States. They range from small lenders to large multi-state operations. They offer a range of financial services, including checking and savings accounts. More than half of their loans are mortgages.
A member is required to get a mortgage loan from a credit union. This usually means that you must have a “common connection” with other members. You could, for example, have a family member that is a member. They might need to be able to live in certain areas, or have to have worked for or retired from companies and governmental agencies associated with the credit union.
Credit unions may be preferred to other options due to their personal service and members only deals.
Nonbank Mortgage Lenders
Nonbank mortgage lenders are more popular than other options. These companies offer their services online and issue mortgages to more people. These companies may specialize in mortgage loans only or offer other types of loans.
Working with these lenders has one advantage: some of the biggest online mortgage companies have built their reputation on fast loan turnarounds. Nonbank lenders may be more willing to lend to you if you have a poor credit history or need a non-conventional loan, such as an FHA Loan.
Mortgage Brokers
A mortgage broker is a good option if you need someone to search for multiple lenders and find the best loan option. A mortgage broker reviews the offers from different lenders and recommends the best loan option. Then, he acts as an intermediary between the lender and you by collecting your documents and submitting them to the underwriter.
The cost of a mortgage loan through a broker can be higher because they often charge a fee or a commission, which you might have to pay at closing. It is important to compare the fees charged by mortgage brokers with other options.
Markets for Mortgages
An assortment of companies offer services that allow customers to compare interest rates from different lenders. This allows them to choose the one they would like to work for their loan. It’s possible to get a great rate and a discount on closing fees. Although the lender you select will handle the entire process, it is one way to view different options without visiting multiple sites.
How to discover the best mortgage lender
Finding a mortgage lender is now easier than ever. Mortgage rates can be found online at rate aggregation and lender sites. Many lenders aggressively advertise their rates to get you to their site.
You should begin your search for a mortgage loan by visiting the banks and credit unions you have an account with. They might offer customers special rates or fees. It’s also easy to search online and find lenders as well as websites that aggregate information–including ratings–about top mortgage brokers and lenders.
Talk to your friends and professionals about references. They might be able recommend a broker or lender they have worked with.
How to Properly Prepare
Before you apply and request mortgage pre-approval make sure that you are financially prepared to take out a loan. Prepare for your mortgage application by:
- Managing your credit score and checking it regularly. Work on improving your credit score before applying for a mortgage. You can build or maintain a stronger credit score by paying off your credit card debts on time, not taking out loans and not opening multiple credit cards.
- Save for your downpayment. However, a downpayment of at least 20% is recommended. You can still get loans up to 3% down, as long as you are able to pay the monthly repayments.
- Stability of your income. Lenders want you to have enough income to pay the monthly installments now and in the future.
What are the Primary Questions to Ask a Mortgage Loan Lender?
Here are some questions you should ask before you choose a lender or complete your mortgage application.
- What time do you anticipate the process will take?
- Do you want to be my main contact during the entire process or will someone else handle it when it gets to underwriting. How will we stay in touch?
- What steps can be done online and what will need to be done in person (e.g. appraisal and closing).
- Do you recommend a interest-rate lock for how long? What if the closing is delayed beyond that date?
These are two questions to ask a mortgage broker if you’re going to work with them:
- What were your experiences with different lenders? How did you compare them and why did this lender rate and lender work best for you?
- How much will you charge for fees and commissions and who will pay them? The lender, me or both?
How to Compare Mortgage Loan Offers
It is essential to compare the interest rates and fees offered at least three lenders or brokers before you decide on a winner. These are some ways to compare offers:
Interest rate. While this is the easiest way to compare lenders, it should not be the only factor. Rates change frequently so make sure to verify that you are working with the right lender before applying for a loan. Ask about points fees, which may help you get a lower rate of interest. You should find out what they cost and if you really need them.
Fees. A variety of fees are associated with a mortgage loan. Some fees are not easy to understand. Some lenders may list fees separately while others combine them. Ask about all fees–including underwriting costs, application fees and other charges at closing. Compare lenders to negotiate the lowest fees.
Mortgage insurance and down payment. If you’re a first-time buyer, it is worth checking with the lender to determine if there are down payment assistance programs that could help you obtain the loan without draining your savings. You will likely have to pay private Mortgage Insurance (PMI) if you put down less that 20%.
After you have chosen which offer is right for you, submit the application. You’ve probably completed the most difficult part of the mortgage process. As long as your paperwork is in order and you don’t have any financial problems before closing day you should be fine. Look forward to signing your loan documents and moving into your new house.