Finding a mortgage lender isn't a difficult task: complete a few online forms for mortgage companies and you know all about the eager brokers who overload your voicemail with their pleas to make contact. Yet, going down this route is not your best bet. You are about to embark on the exciting journey to being a homeowner, pressure is the last thing you need right now.
Rather than get pushed into a corner, take your time and do your homework, make sure you understand how the rates and terms vary with different lenders, so that when you do make a decision, it will be an educated one. The guide below will make sure that you feel just as good about your mortgage lender, as you do about your perfect new pad.
Understand Your Borrowing Needs
To rid yourself of a whole lot of hassle with mortgage lenders, get your side straight from the start. Have a clear statement of how much cash you can use for your new home and how much you need to borrow.
At the very minimum you are going to need savings equal to the down payment on the house (expect 20% of the house value, although at times it can be less). Then there is the closing costs, property tax for the first year and house insurance. Mortgage lenders typically like to see that you have a little extra in the piggy bank, in case you lose your job or run into some other financial crisis.
The next step is to work out how much money you need to borrow - this step should be completed before you make contact with any mortgage lenders. To get things moving towards the goal you have in mind, you want to start any meetings with potential mortgage lenders in a confident and informed way.
It's Time To Ask Around
Has one of your friends or someone you work with just become a homeowner? Did they have a good experience with their chosen mortgage lender? If they did, it's time to ask for the contact details of the mortgage lender. (On the flip side, if they had a terrible experience you still want to write down the details, so that you can steer well clear!)
Another good source for information is your real estate agent or financial adviser. They are generally a good option for a reliable and trustworthy recommendation.
Do Your Homework, Cleverly
In the event that you haven't been able to get any recommendations, it's time to take a look at local and national lenders online. But, there is a problem with online mortgage quote generators; In one way they are handy, on the other side they are a bit of a pain. You enter all of your details to see whether you qualify and how much you can borrow and may think you're all done.
The problem is that once you've entered all of your personal details, you've put them in the hands of lenders. This means you can expect a whole lot of contact, granted that may be a good thing, but then again it may not.
Lenders buying and selling lists of potential mortgage borrowers is something the Federal Trade Commission has mentioned. It is a legal matter, but you can certainly get around it. You are able to request that your personal details are not given to lenders (known as opting out) by either calling 1-888-5-OPTOUT or online at www.optoutprescreen.com. Another option is to ask to go on a do-not-call list, this can be done via www.donotcall.gov and lasts for five years.
After completing both, or one, of the above steps, you can have peace of mind to do a few online searches for mortgages without worrying about an email, voicemail or call overload.
Another great idea is to use a mortgage rate comparison, like the one here, to give you a good base figure of how rates are looking in your area with the loan you require and your presumed credit score.
Calling banks or checking the bank or credit union's rate online is another excellent way to cleverly do your homework. Expect to be asked about the house value and how much you need to borrow. Once you've given these details they should be able to give you their interest rate.
In the event that the conversation starts to heat up with personal information being requested, all you need to do is state that this is simply a preliminary call, then politely round up the conversation. If the agent starts to pressure you, telling you the rate could change at any moment, they may not be the right lenders for you. You want a combination of good terms, a great rate, and an exceptional attitude.
Whilst loan officers in banks, credit unions, and other such lending institutions are not slick sales people, they do want to coax you into applying for a loan with them. Since it's clear that lenders want your business, you need to make them work for it. Say you would like a cost and fee breakdown - that should include commissions, appraisal fees, application fee and so forth. You'll soon see that there is a lot more involved than simply the interest rate.
Can any of these fees be included in the mortgage instead? Is your attractive interest rate dependent on paying points? (this is often 1% of the loan amount upfront, for each point).
How much is the down payment, if you do not have the entire 20% will you need to pay PMI (private mortgage insurance)? Once you build up the appropriate amount of equity will the PMI go away?
Also, your lender should be someone who makes you feel comfortable. Your preliminary meeting should not have even a hint of pressure whether by phone or in person. You should expect the lender to be approachable, as well as very informed. If you are talking with someone who you are happy to share your personal and confidential information with and they are offering you a great rate, it looks like you are with the potentially right lender.
Get It Down To A Shortlist
Don't feel pressure to run with the first lender you speak with, regardless of how well the meeting went. Zillow, a real estate website, gives the recommendation to find a minimum of three lenders who you think could be great. Then do more homework. Read reviews, look at forums and talk to your real estate agent.
At the end of the day, it is you that will be signing the bottom line, so your thoughts are the crucial ones. Zillow puts forward the suggestion of making a note on the following points following a one-on-one conversation with a potential lender:
- Was the lender quick about returning contact?
- Was the lender rushing through the conversation and trying to get you on board, or were they patient and pleasant?
- Was the lender knowledgeable as they answered your questions?
- Were you given details such as estimated costs, closing date, timeline and so forth?
- Did you find the lender was trustworthy when discussing rates and their potential to change?
It is clear that the right lender is friendly, efficient and capable. Finding these qualities in a lender may at first seem like a mission impossible, however, once you know the right steps to take, it's more than possible to make a great decision.