Choosing the right lender is a very important part of the home buying
process. One of the first steps in buying a home is to talk with lenders and
mortgage brokers to obtain a loan pre-qualification or loan approval. Getting a
pre-qualification/approval will tell you whether you qualify for a loan at this
time and how much money you can borrow for your home purchase.
Although there are many good lenders (and not so good), certain lenders may
not be right for every buyer no matter how good the lender is. Buyer’s
situations differ and finding the right lender for your situation is essential
for your financial well-being. This will save you money and many hours of
anxiety.
Traditional mortgage lenders like banks and credit unions first come to mind
to buyers. While there may be personal benefits to using a certain lender, you
should not research just one mortgage venue. Shopping around is always
recommended to find the best price, terms, and customer service that you are
looking for.
Traditional mortgage lenders are not your only choices.
Mortgage brokers are another avenue that should be looked into. Mortgage
brokers differ from the traditional mortgage lenders in that brokers do not fund
or even approve any type of financing. Traditional mortgage lenders will approve
(or disapprove) your loan application and also fund the loan. Mortgage brokers
match prospective borrowers and lenders together according to your needs and
will find the best lender for you. Mortgage brokers
can often find a lender who will make loans that certain banks refuse--problem
credit is one example. Loans for unique or commercial properties might be easier
to secure through a mortgage broker.
Mortgage brokers do everything the lender would do -- check your credit, work
your record, arrange for title search and hire the property appraiser, but once
all of this information is compiled, the broker selects a mortgage lender that
will most likely accept your application and approve your loan based on your
financial data and personal information.
So, how do you choose the right lender for you? Do your homework. Some of
the best resources for finding good lenders are family members, friends,
co-workers, or your Realtor. Be sure to ask how they’ve been treated since the
closing and the type of service have they received. Look for a lender that has
a program which meets your needs. Ask about the brokerage fees and who
customarily pays them (remember, everything is negotiable).
Be sure to get pertinent information about the loan, such as interest rate
and annual percentage rate (APR). How many points will you be required to pay?
What are the closing costs? How long will it take to process the loan, and
what’s the lock-in policy for the interest rate? Will there be a pre-payment
penalty? Does the lender have a first-time buyers program? What is the lender’s
track record on closing loans?
As always, the key is to gather as much information as you can, both about
the lender and the programs that he or she has to offer. Once you find the
right lender for you, work as aggressively with your lender to obtain financing
as would with your Realtor to find the right home.
