One of the biggest challenges of buying a home is choosing the right lender. As with any big purchase, you should shop around for the best deal. Fees and terms can vary widely from lender to lender which can greatly influence how much you’ll pay each month. But with so many choices in lenders, how do you find the one that’s right for you? Here’s what you should consider.
Know where to look
First things first -- when you’re shopping for a mortgage lender you need to know where to look. There are many kinds of companies that offer home loans. These include:
- Traditional banks -- Conventional banks offer a wide range of financial services, including mortgage loans. If you already have a checking and/or a savings account at a bank, then this can be a good place to begin your search.
- Credit unions -- Like conventional banks, credit unions also offer a range of financial services including home loans. To get a home loan with a credit union, you need to be a member.
- Online mortgage companies -- Nonbank lenders often offer their services completely online and usually specialize in mortgages and other types of loans. These are great choices if you need to act fast or have had problems with your credit history.
- Mortgage brokers -- Are you confused by all the options? Then you can opt to work with a mortgage broker who will help you sort through the choices and find the one that’s best for you. They earn a fee or commission which may need to be paid at closing.
- Mortgage marketplaces -- There are also online options that allow you to compare rates from multiple lenders. Once you find a lender you like, you then work with them directly.
When shopping around for a mortgage, you need to be prepared so you’ll get the best deal possible. Check your credit report and take steps to improve your credit score. Save for a down payment and be able to prove that you have a stable income to afford your monthly payments.
Ask the right questions
Some questions you’ll want to ask various lenders include:
- How long does the application process take?
- Who will I communicate with?
- What steps happen online and which ones will need to happen in person?
- Can I get a rate lock, and what timeframe do you recommend for that?
Finally, once you’ve gathered information from different lenders you’ll want to evaluate your options. First, take a look at the interest rates you’ve been offered. These can change from day to day, so you’ll want to choose your lender before you lock in your rate. Then compare fees. There are many fees that are incurred when applying for a mortgage. Some lenders lump them together and some charge them separately. These could include underwriting fees, application fees, and closing costs. Finally, find out if there are any programs available to you that offer assistance with your down payment. This is particularly helpful when you’re a first-time buyer.
Complete the application
Once you’ve compared offers and chosen the one that’s right for you, you’ll complete the application. As long as your financial situation doesn’t change before you close on the home, then once your application is submitted the hardest part is over.
Compliments of Virtual Results