When buying a home, searching for the right home won’t necessarily be the only searching activity you’ll do. You’ll probably look for the right agent to work with, look for best homeowners insurance, look for the best lender, and more. For many first time home buyers, shopping for a mortgage lender or broker is probably not even on their radar. But just as it’s important to find the right home, it is also important to work with the right lender. Why so? When you buy a home, you’re in it for the long haul – 15 to 30 years of mortgage payments. If you pick the wrong lender and the wrong type of mortgage loan program, chances are, you could overpay for your home loan or be in financial trouble. Finding the right mortgage lender to work with is not just about finding the one who offers the lowest mortgage rates. You’ll have to do some homework by comparing rates, doing research and interviews before choosing who to work with.
How To Choose A Mortgage Lender
1. Remember that your credit score has impact on your home loan.
Get your credit score in shape when you plan to buy a home. Your credit score has the biggest influence on how good a deal you’ll get on your mortgage loan. The higher the credit score you have, the more negotiating power you have with your potential lender. High credit score often get the best interest rates, lower credit score mean a higher interest on your home loan. A good lender should be able to give you a sound advice on ways to improve your credit.
2. Ask for referrals
Ask your family, friends and co-workers who has bought a house. They could share invaluable insights about their experience. You can also read online reviews. Better Business Bureau is a good source for checking mortgage companies’ reputation. You can also ask for referrals from your agent if you are working with one. They surely can give you suggestions since they work with lenders.
3. Compare rates from several mortgage lenders
There are many types of lenders – credit unions, mortgage bankers, local mortgage loan companies, online mortgage lenders – you have a lot of options. Compile a list of mortgage lenders that you’ll be checking for interest rates. You can also start shopping for the best interest rates online.
4. Test the mortgage company’s customer service
If the mortgage company offers excellent customer service, it will surely be easier for you especially if you have questions about your application down the line. You don’t have to apply for a loan to ask questions. Asking questions about the application or the lending process and seeing how they respond to your inquiries can tell a lot about the company. Are your calls returned? Did you wait on hold a long time? Did the lender answer your questions amicably?
5. Request for a good faith estimate
Once you have a short list of lenders, at least three lenders, ask for an estimate of list of costs. A good faith estimate is a quote of programs and current rates based on the purchase price and loan product you are considering. The costs include the following:
- Closing costs
- Title insurance
- Interest rates
- Attorney fees
- Partial month interest
- Credit check costs
- Hazard and property insurance rates
You can use this estimate to choose the most reasonable lender.