Finding the Best Mortgage Lender: A Few Tips

When you’ve decided to purchase a home, you quickly find that there are many decisions to make. Not only do you have to find a home that you want to purchase, you have to find a mortgage lender and mortgage that is right for you and your situation. Most of these decisions hang on your financial situation, however finding the right mortgage lender isn’t only about money.

How money factors into a mortgage lender

Obviously money does factor into your choice of a mortgage lender. You need to find a mortgage lender that offers the mortgage that you want and will need to meet your financial goals. That could be a fixed or adjustable rate mortgage, an interest only mortgage, balloon mortgage or jumbo mortgage. The mortgage lender you choose needs to offer the product you need.

Another factor to consider is that each mortgage lender will charge a different fee for giving you a mortgage. Each mortgage lender adds on their interest points to your interest rate (prime interest rate plus lender’s points). You need to find a mortgage lender that has the lowest additional points to add on to the prime rate. You are, of course, looking to save as much money as possible when purchasing your home.

The different types of mortgage lenders

There are a few different types of mortgage lenders that you can choose from: traditional mortgage lenders such as banks and credit unions, mortgage companies as well as mortgage brokers and others.

Traditional mortgage lenders such as banks and credit unions seem to make obtaining a mortgage the most difficult. In most cases, they require that you have impeccable credit and that you’ve been banking with them for some time. However, the bank or credit union that you do all your banking with should be your first stop – they know you, your banking and your credit history. They can quickly tell you whether they will or will not lend the money for a mortgage.

Mortgage companies exclusively sell mortgages – they carry many different kinds of mortgages and cater to all kinds of applicants. In fact, some mortgage companies, such as those that deal with people with bad credit fit into the ‘other’ category. For the most part, mortgage companies are where many people choose to place their mortgage. Because the company deals strictly in mortgages, they have their system down pat – their rates are usually fair in comparison to other methods of financing a home.

Mortgage brokers are the cream of the crop; they are go-between people. Just like it sounds they work between you and many different mortgage lenders to find you the best mortgage with the best rates and terms. Most mortgage brokers deal with dozens of different mortgage lenders and can quickly find you a good mortgage with good interest rates.

The other category is where mortgage companies for people with bad credit and real estate financiers come in to play. These mortgage companies aim their business towards people with less than perfect credit. Their services are fair for people who couldn’t otherwise own a home. There are also real estate agencies that will arrange and offer financing as well.

Interest rates and your mortgage lender

Every mortgage comes with an interest rate – regardless of what kind of mortgage it is. There are interest only mortgages, as well as jumbo mortgages, balloon mortgages and the more standard fixed rate mortgages and adjustable rate mortgages.

The one thing they all have in common is interest rates, although how much interest is charged varies by lender, by type of mortgage and by length of term. However, each mortgage lender bases their advertised interest rates on the prime rate. The prime rate in the United States is typically three percentage points above the federal funds rate as set out by the US government. From here, each mortgage lender will add on their lender’s points (interest percentage points) to come up with their own mortgage interest rates. Each mortgage lender is free to choose how many points they add on. This is based on the services they provide and can range from only a point or two to many points (for bad credit lenders).

More than money

Choosing a mortgage lender should be more than just about money – a mortgage lender is a person whom you are trusting with your financial information. You are allowing them to dig through your credit records and give you a mortgage that could make or break your financial future. Of course, everyone knows that owning a home is cheaper and better than renting, but the wrong mortgage can put you in a bad place quite quickly. You should be able to talk to your mortgage lender and discuss with them what your long term financial goals are, as well as your goals for purchasing this home. The answers to these questions could alter the mortgage product that is best for you. If you don’t feel comfortable talking to your mortgage lender, or if they seem distant and uncaring about your situation and what is best for you, then no amount of points are worth potentially destroying your financial future and having the wrong house, cost, price, mortgage and mortgage payment.

You should feel quite comfortable with your mortgage lender and discussing the various products he or she has to offer you. Feeling at ease with your mortgage lender will also allow you to negotiate your rates and terms on the mortgage you’re seeking – you should feel free to ask questions, and try to barter on certain clauses and terms of your mortgage loan with your mortgage lender.

Before you make your final selection, be sure to ask several questions. Find out if your potential lender can guarantee his or her Good Faith Estimate before you begin the loan process. Ask about prepayment penalties with each of the products they offer. Finally, don’t forget to ask about applicable closing times, as it can help to have a lender who can speed things up for you.

With many mortgage lenders to choose from, finding the one that is right for you in every aspect shouldn’t be too difficult. If you’re having a hard time deciding which mortgage lender is best, consider going with a broker that you trust to help find the right mortgage lender for you.