When you have decided on purchasing your first home, your next task should be to home in on the right mortgage lender. The mortgage-lending market is saturated with tens of thousands of lenders and choosing one is more than an overwhelming task. However, it shouldn’t be that difficult, since there are only four main types of lenders to choose from: banks and credit unions, independent mortgage brokers, online lenders, or direct lenders and mortgage bankers — but how do you know which one is right for your needs?
We all want the best possible mortgage rates for our home purchase or refinancing. By law, there are certain regulations that mortgage lenders must follow when borrowers seek them out for a home loan. Unfortunately, many borrowers seeking home loans assume all mortgage lenders to be cut from the same cloth or that one lender would be as good as the other.
Choose a mortgage lender with solid reputation and ethical standards. This goes for everyone and is regardless of whether you live in California or New Mexico. If you find yourself choosing between two quality lenders, make sure you have an objective set of deciding questions, based on your needs, to draw an apples-to-apple comparison.
It’s true that a lot of the loan-taking process can be tedious and overwhelming. However, there are loan providers that offer Easy loans no paperwork deals that take those frustratingly boring details out of the whole process, so you can draw funds easily and start working on your fund-starved projects immediately.
Here are some tips to help you choose the right mortgage lender:
Know What Type of Loan You Need
The first step in choosing a mortgage lender is to identify the type of loan you need. There are many different types available, so make sure you know exactly what kind of loan works best for your financial situation.
Size Up Their Reputation
Before you decide on taking the loan, it’s better to be aware of the lender’s reputation. Read reviews online or ask the people who have previously dealt with the lender to get an idea about them. If the lender has mostly negative reviews, it’s better to look elsewhere.
Get Pre-Approved Before Shopping For a House
The saner step to take before making a home purchase would be to get mortgage pre qualify. Preapproval means that the lender has agreed to lending the amount for the house that you have chosen. It’s kind of like having the funds before you can go shopping for houses.
Don’t just go with the first lender that offers you their deal. Shop around for other lenders who offer competitive rates and fees, as well as those who specialize in the types of loans that would best meet your needs (such as first-time homebuyers.) Start by comparing lenders’ interest rates that you would gather from their online websites or by calling them and getting direct quotes.
Research the Lender
Before contacting any lender, spend time researching them online and comparing the different type of loan deals, fees and rates, and how long a specific lender has been in business.
Find out whether or not they lend to first-time homebuyers or if they specialize in certain types of properties, like condos or townhouses.
The valuable information you’ll gather from your research will help narrow down the list of potential lenders that you will have to contact.
Take your time
Don’t feel pressured into making any decisions right away. You should take as much time as you need to make sure that you’re comfortable with your choice of lender.
Mortgages are not free and are offered against a huge collateral—anything that the lender can confiscate in case of a default. Usually, a collateral is some property or assets, like chips and bonds, that you own. Based on your financial assessment—income, employment status, or credit history—the lender will then make the decision to lend or not.
Keeping in mind the risks, it is wiser to make your mortgage decisions wisely and rationally.
Get referrals from friends and family members who have recently purchased homes. If they were happy with their lender, there’s a good chance you will be too.
Ask your real estate agent for recommendations or check out their website for local lenders that do business with them frequently.
Once you’ve narrowed down your list of potential lenders, get in touch with their previous borrowers and find out about their experiences with the lenders. They will let you know if the lender caused them any problems during closing or servicing of the loans.
Valuable information like this is why you should talk to the borrowers directly instead of relying on hearsay or word-of-mouth communication.
Look at online reviews
Online reviews can be great sources of information about various lenders’ reputations and customer service practices.
Check out Yelp, Google+, Angie’s List, and other sites that allow users to post reviews of businesses they’ve used in the past.
Look for the patterns in the types of reviews that appear for different lenders — positive or negative — and try to find one that has mostly positive reviews from previous borrowers.
Find out if they have specialties
Not all lenders specialize in all types of loans, so it’s important to find out what type of loan you need and whether the lender that you have chosen specializes in that area.
For example, if you’re looking for a VA mortgage loan—offered to veterans and service members only—make sure you are dealing with a lender that offers it.
Find about the rates
Rates vary from lender to lender and for different types of loans. Make sure that your chosen mortgage lender offers competitive rates for the loan you want before you sign up. Also, ask if their rates change often and the duration of each rate change, so you can prepare for any future fluctuations.