It’s easy enough to find a mortgage lender: If you’ve ever filled out personal information on a mortgage company’s website, you may have found your voicemail flooded with overly eager brokers who want to be your new best friend. This probably isn’t the ideal way to find a great mortgage lender, though. As you consider the awesome responsibility of home ownership, the last thing you need to feel is pressure.
Instead, take your time, do your research, compare rates and terms between various lenders, and then make an educated decision. If you use the following steps, finding a good mortgage lender will be as rewarding as finding your dream home.
Know what you have, and what you need to borrow
You can eliminate a lot of tedious back-and-forth with lenders by starting out organized on your end. Know how much cash you have on hand, and how much you’ll need to borrow to buy a home.
You’ll need at least enough savings to cover your down payment (typically 20% or more of the home’s value, but it can be less), closing costs, and your first year of property taxes and homeowners insurance. But lenders also like to see that you have some cash reserves to pay your mortgage in the event of an emergency, such as a job loss.
Next, figure out how much money you need to borrow — and do this before contacting a mortgage lender. Going into a meeting with a lender confidently stating your requirements will steer the conversation directly toward your ultimate goal.
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Did your friend or coworker recently buy a house? Were they pleased with their experience with a particular lender? If so, get the lender’s contact information. (By the same token, if someone you know had a hellish experience with a lender, get that information, too — so you can avoid the same fate.)
Your real estate agent or financial adviser may be able to recommend a few local mortgage brokers or lenders they trust, and while you shouldn’t blindly follow their advice, it’s certainly a good starting point.
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Do a lot of research — stealthily
If you don’t have any personal recommendations to go on, you can research local and national lenders online. Here’s a tricky thing about online mortgage quote generators, though: They’re really convenient, but they can be a hassle, too. After entering some personal information to see how big a mortgage you can take out and what kind of rate you’d qualify for, you might think that’s that. But remember, lenders now have your personal information. That means within 24 hours of entering your name, phone number, household income, address, and other info, you can expect phone calls — lots of them — from a variety of lenders, good and bad.
The Federal Trade Commission notes that lenders can and do buy lists of consumers looking for loan information. This is a legal procedure, but one that you can work around. The FTC recommends opting out — you can request that your information not be given to lenders via www.optoutprescreen.com or calling 1-888-5-OPTOUT. You can also visit www.donotcall.gov to be placed on a do-not-call list for five years.
Once you’ve done either or both of the above, you can feel secure searching for mortgage quotes online without worrying that lenders will be blowing up your phone or spamming your inbox. Better yet, you can use a mortgage rate comparison tool like this one to get a ballpark idea of rates in your area, based on your estimated credit score and the size of your loan.
Another way to discreetly research rates and lenders is to check your bank or credit union’s daily posted rates online, or to call banks and lending institutions and ask what their current loan rates are. They’ll likely ask about the cost of the home you want to buy and the amount of money you’re looking to borrow. That should be enough for them to give you their interest rate.
If the conversation steers toward more personal information such as your Social Security number, simply (and politely) say that this is just a preliminary inquiry on your part and end the phone call. And if you feel at all uncomfortable during the conversation — if the agent wants to jump into the loan process or quickly tells you that the rate could change in the next day or the next five minutes — it’s probably not the lender for you.
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Look for a good rate, good terms, and a good attitude
Loan officers — the people you’ll work with at most lending institutions, whether it’s a bank or credit union — aren’t exactly used car salesmen, but they do have an interest in getting you to apply for a loan with their institution. “First and foremost, the primary goal of a mortgage originator or loan officer is to convince you to apply for your mortgage with them,” writes lending expert Mark Greene in Forbes. “Financial acumen is helpful but not required; the best salespeople are the biggest producers in the mortgage industry.”
That means lenders are looking for your business — so make them earn it. Ask for a breakdown of all costs and fees — including origination or application fees, appraisal fees, commissions, and more — because comparing mortgages goes beyond just the interest rate.
Can you roll any of those fees into the mortgage? Does that enticing advertised rate require you to pay “points” (typically 1% of the loan upfront, per point)?
What is the down payment requirement, and will you owe private mortgage insurance (PMI) if you don’t have a full 20% down payment? Will the PMI go away after a few years, once you’ve got a sufficient amount of equity built up in the home?
What’s more, you should choose a lender with whom you feel comfortable. There shouldn’t be any pressure associated with your initial meeting, whether it’s in person or on the phone. The lender should be knowledgeable and approachable. If the person you’re talking to is someone you’d feel confident sharing your most personal financial information with, and he or she is quoting you a great rate from an institution you trust, you’ve probably found the right lender.
Narrow it down
Don’t feel like you have to go with the first lender or mortgage broker you contact, even if you had an awesome meeting. Real estate website Zillow recommends finding at least three lenders with whom you feel you could work. Then do more research. Look at reviews online, or ask your real estate agent for their input.
In the end, you’re the person working with the lender, so your opinion matters most. Zillow suggests that during your one-on-one conversation with a lending professional, you note the following:
- Did the lender promptly return your phone calls or emails?
- Was the lender friendly and patient, not rushing through the conversation in the hopes of quickly securing another customer?
- Was the lender willing and able to answer your questions in a thorough manner?
- Did the lender discuss the timeline and particulars of the loan, including estimated closing date and costs?
- Do you believe the lender was honest with you about rates and if/when they might change?
As you can see, the right mortgage lender for you is someone who is competent, capable, and caring. Finding those three C’s in a lender may seem like a daunting task, but when you’re armed with the right tools, you can make the best decision.
Buying a home is a huge commitment and investment; it’s only natural that you take your time and choose a lender who will ensure the mortgage process goes as smoothly and as pain-free as possible.
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