Surprisingly, knowing how to choose a mortgage lender isn’t as easy as it seems. It is a simple fact that not all lenders are fair, honest, and prepared to take on each and every client. For this reason, borrowers need to do their homework and find the best lender for their specific needs. In truth, it is sometimes easier to find suitable real estate agents and home options than it is to find the best mortgage lender for you and your specific needs.
With this in mind, we will explain everything you need to know to get you started in finding the best lender for you. The first thing you want to do is research them. Put together a list of referrals, don’t be shy. Ask your friends and family who they use. You’d be surprised to know how many amazing connections can be established with just a simple inquiry.
Let’s talk about the different types of mortgage lender options available to you before you seek mortgage pre-approval:
Mortgage Broker, in essence, a mortgage broker is an intermediary. They connect borrowers with appropriate lenders for various situations. They are paid a commission at the end of the transaction by either the borrower or the lender.
Loan Officer, a loan officer is a representative of a bank or a direct lender. Essentially, they know everything and anything about loan products and loan terms offered by their bank. They assist borrowers in person through loan applications and are a wealth of information for all of the loan offers available to you.
Online Lenders: In a broad sense, online lenders are any type of lender that is not directly linked to a traditional bank. Online Lenders can assist you from prequalifying, loan estimates, and all the way to closing without ever stepping foot in a traditional bank.
Now we need to discover your specific needs:
What’s your financial situation? Your personal finance plays a huge role when how to choose a mortgage lender. You will need to have several key components in hand to complete your mortgage application. Some of these are work history, so W-2s, K-1s, 1099s, and your past two pay stubs.
How is your credit score? You will need a credit score of 620 or higher for most mortgage companies to consider you. Be careful not to run a credit report until you are ready to borrow the money. This can affect your overall credit score with the credit bureau, and that can lower your chance of loan approval.
Have you checked your debt-to-income ratio? Remember to factor in any student loans and credit card debt. This measurement ensures your capability to make your monthly mortgage payment.
Do you have your tax returns and bank statements? Underwriting needs to see how much you have in your savings accounts, what your debts look like, and how financially responsible your monthly payment history is.
Do you understand your down payment requirements? This can affect your interest rate and whether or not you will need to pay private mortgage insurance (PMI). Your down payment is the earnest money you bring to the transaction. The standard down payment is typically 20% of the full cost of the loan.
Are you prepared for closing costs and loan origination fees? Make sure you have money set aside for these extra expenses. Each loan will come with it’s own set of fees, so be sure to ask about this upfront.
Next, we need to decide what type of loan you need:
Conventional Loans: Conventional loans are loans that are not backed by the federal government. They come in all shapes and sizes. The key is finding the right mortgage for you.
Conforming vs. non-conforming loans: There are specific guidelines in place to protect your home and the lender’s asset. After all, the home is the collateral, so the government wants to make sure the home is safe, sound, and secure for years to come. You can get loans that conform to these standards and loans that do not conform.
Adjustable rate mortgages vs. Fixed rate mortgages: Adjustable rate mortgages fluctuate with the prime interest rate. These loans are often used when a borrower is in need of money now but plans on refinancing later or selling before the interest rate changes too dramatically. Fixed-rate mortgages are locked in at the loan origination and remain the same throughout the life of the loan. They are considered to be the safer bet.
Federal Housing Authority (FHA loans): Freddie Mac and Fannie Mae are financial institutions that offer very popular loan options among first-time home buyers. The FHA originated in 1934 when America was flat on its back and homeownership was impossible. The FHA insured notes on property in order to allow Americans housing opportunities. These loans are considered to be among the safest for homeowners.
Jumbo Loans: These loan programs are used when a property exceeds the loan-servicing limits set in place by the FHA. Additionally, when a property is appraised at a lower value than the loan amount needed, jumbo loans are a great option. Commonly, jumbo loans offer options for borrowers to fix, flip, or refinance properties. Jumbo loans are for properties that do not meet the standard mortgage terms set in place by government-backed funding. They are great options for properties that stand to gain home equity fast with just a few repairs.
USDA loans and VA loans: Qualifying borrowers of these types of loans typically aren’t required to pay anything as a down payment. VA loans are for eligible military servicemen and veterans. USDA loans are intended to supply mortgage options for those borrowers that want to live in rural and sparsely populated areas.
Lastly, it’s time to start shopping for your perfect match!
The realm of finance can seem overwhelming, but in truth, it’s very simple when you trust your lender. Be sure to check them out on the Better Business Bureau and vet them for yourself. Of course, finding someone that your friends and family have used is always a great plan.
Whether it’s finding the right loan for you or finding the perfect lender for this transaction and many to come, once you learn how to choose a mortgage lender, it is invaluable for growing your real estate portfolio and achieving your dreams of homeownership.
Now that you understand How to choose a mortgage lender let’s connect you with the right lender to help you through the mortgage process.
Your home plays a significant role in financial security. So, regarding your mortgage loan, you want to be sure you’re making responsible decisions. Undoubtedly, the loan process invokes insecurity in many people. In particular, navigating through a sea of paperwork and financial jargon can be unsettling without honest guidance. In fact, a lack of clarity can lead you down the wrong path and compromise your financial future.
You deserve to work with a lender who brings clarity and has your best interest at heart. Whether you are looking to purchase a home, help with refinancing, lower interest rates, or specifically ensure that you have made the best decision for the life of your loan, Mortgage Insider can help you after helping thousands of families reach their goals to create stronger financial futures.
The steps are simple:
1. Schedule a Call: An experienced loan officer can discuss your needs and guide you through the possibilities.
2. Get Approved: We’ll help you through the application process and facilitate the steps for approval.
3. Exhale: Put your feet up and feel secure knowing you made the best decisions about your home loan.
With proper guidance, you can get your first home, accommodate your growing family, and start that renovation project—whatever goal is on the horizon. An alliance with Mortgage Insider will give you the confidence to know that your mortgage loan is setting you up for financial success. Mortgage Insiders offers today’s latest financial news and mortgage trends. Subscribe to their channel for current events.
