Choosing a lender and finding the type of loan that best fits your financial needs is a critical part of home buying. You probably have a price in mind that you can afford, but when it comes down to assuming financial risk, the lender may arrive at a different number. Loan officers work for banks and can only offer you rates that their banks approve, so the question of finding the right representative also involves dealing with the right bank.
1. Decide if You Need a Mortgage Broker. Brokers research a number of banks for you to find the right loan and the best interest rate for you. Brokers deal with wholesale rather than retail loans and they earn their money by setting up the deal between a home buyer and a lender, so you do end up paying for their service. A word of caution: The wrong mortgage broker could set you up with a loan that is most profitable for them rather than in your best interest. Do your research. Ask for past client references and find out if they were happy with a broker’s service and the product he found for them.
2. Decide What Kind of Lender is Right for You. There are many differences between large and small banks. Most people want the best interest rate they can find. Whether a lender is large or small does not necessarily determine who has the best rate. Research multiple banks. Mortgage rates and closing costs vary from lender to lender. A lower interest rate can save you thousands over the life of a 30-year mortgage, and lower fees result in fewer upfront costs. Get an estimate of your overall costs.
Large banks frequently have more loan options. But they handle many loans per week and their timing can lag. Also, the guidelines for getting approved for a mortgage with a big bank are strict. There’s an established minimum criteria and applicants who don’t meet this criteria can’t qualify for a loan.
Smaller lenders sometimes offer more competitive rates on different types of home mortgage loans, as well as lower fees. They tend to offer more personalized and faster service to their loan applicants. Also, because a small bank follows different guidelines and criteria than large banks, they often have more flexibility to approve a loan applicant who otherwise would have been turned down. However, small banks might be limited in the types of loans they can offer to someone with complex financial needs.
3. Ask Your Sphere of People for a Referral. Ask your family, friends, and co-workers who they used and find out if they were happy with their lender. There’s a sea of options with regard to mortgage lending. Cut through the clutter by going to people you trust for a recommendation.
4. Ask Your Real Estate Agent for a Referral. Your agent should be able to give you several names to contact. Loan officers who know you were referred by an agent should take very good care of you because they want that agent to continue giving them business. Use that to your advantage to ensure you get great customer service.
5. Research Your Lender’s Reputation. Check online reviews and speak to past clients of a particular lender and loan officer. Never hesitate to ask as many questions of your lender as you need to ensure you’re pairing with the right bank and the right loan officer. Consider this proactive work as preventing major headaches down the road in your home buying process.