Now that we are in the home-buying season, let us talk about how to choose a home mortgage lender.
Let us face it. Many lenders quickly pump out pre-qualification letters, send buyers out looking for homes, get their expectations up, and then pray that the loan will close. That can be a massive waste of your time and emotional energy for all parties involved. There are better ways.
10 Tips for Choosing a Home Mortgage Lender
1. Do Your Research With Your Real Estate Agent
An excellent real estate agent should be knowledgeable and care about your loan terms. You need someone who knows the numbers. Although your agent does not need to be a loan expert, they need to understand loan options and terms and have opinions on what lenders tell you —partner with your agent. If your agent is unfamiliar with the loan process, it may be time to find a new agent.
>> See Not Sure Who To Trust In The Real Estate Business?
2. Get Lender Referrals
It is important to get at least two lender referrals from your real estate agent and friends who have bought recently. Avoid going online, and do not disclose your sensitive information to anyone. Get actual referrals first.
3. Call A Few Lenders
Yes, take the time to speak with these lenders.
- Do they answer their phone?
- Do they take time for your call?
- Do you get the sense that they are knowledgeable and will educate you on the terms of your loan?
- Or do they delegate you to an assistant and tell you "not to worry"?
Choosing a lender is a big decision. It amazes us how many people select whoever has the best teaser rates. Loans are complicated, and you must take time and do your homework here. You will live with this loan for 30 years, so you must do it right.
4. Questions To Ask The Lender
Are they familiar with your type of loan? Your price range? Your geographic area? Have they closed these types of loans recently? If you are getting an FHA loan, don't work with a lender who only focuses on 20% down loans.
If your price point is $300,000, find a lender that works this price range, not one whose average price is $800,000. Can a lender work in all price ranges? Yes, but you want the best lender for you and your type of loan.
>> See Buying Your First Home? Consider The Maryland Mortgage Program
5. The Lender's Office Structure
Does the mortgage lender answer the phone? Do they have an assistant? Do they have in house underwriting? Is there an office?
Getting a loan from contract to closing is complicated, and many parties are involved. It would be best to have a lender that is "on it" daily - sending out updates, has a knowledgeable assistant, is experienced, and has an in-house underwriter so that any changes can be made quickly and efficiently. Beware of lenders that are large banks or online-only, as you will often get caught in the voicemail maze and cannot promptly get the service you need.
6. Get educated about home mortgage loan terms
Yes, I know this is rough and can be unpleasant. But you, not your real estate agent, must understand the terms of your loan. It is your loan and no one else's.
- Do you understand the terms?
- Do the terms change over time?
- What is your monthly payment when all expenses are included?
- Are there any hidden fees?
- How much money do you need to bring to the table?
- Has your lender taken the time to educate you on all of these details?
You do not want to feel the pressure of figuring all of this out at the closeting table. Take time, in the privacy of your own home, to read documents, ask questions and get educated before you are at closing and everyone is staring at you.
>> See Lending Terms: What Does A First Time Buyer Need To Know?
>> See How Much Down Payment Do You Need To Buy A Home?
7. Get references from recently closed customers
Contact some recently closed customers and ask:
- Did the loan close on time?
- Were there any last minute issues?
- Should you ask certain questions that you may not have thought of yet?
The last thing you want is to be surprised at the closing table. This is not fun. You want to make sure you have a seamless closing so asking these questions now will help you prepare for later.
8. In house underwriting for home mortgages
This is a big one and I know that I mentioned it before.
There are many changes happening this summer with the loan process and with so many parties involved, it is highly likely that changes will have to be made to the loan during the pending process.
Your lender needs to have access to an in-house underwriter so that changes can be made quickly and efficiently. The underwriter looks out for the best interests of the bank and is usually a very conservative, numbers person.
Often lenders, real estate agents and the parties involved in the deal, renegotiate terms that the underwriter rejects or changes. Better to know now than later. Let's run everything by the underwriter before you get your hopes up.
>> See Buying A Home In The Baltimore Area? Go Local!
9. Check on the lender's reputation with your real estate agent and your title company
If you value your real estate agent's expertise (which I hope you do), ask him/her about his experience with this lender. Also ask your title company as the title company will be familiar with problems that crop up at closing.
10. Go house shopping!
When you have done your loan homework and partnered with a great agent and lender, your team is in place. Go shopping! Have fun and enjoy the search. Your team is behind you and will take care of all of the details while you plan your move. Congratulations!
>> See Buying A House This Spring? Ten Tips To Get You Started.
