3 Tips for Finding the Right Lender and Mortgage Program
The most important part of the home buying process is financing. Figuring out how much you can afford and getting pre-approved for a mortgage are typically the first steps before starting your search. But how do you know if you’re working with the right lender? And how do you know which loan program to choose? Here are some tips to help you get started.
Work with a local professional
Today, you can shop for almost anything online, including mortgages. But despite how attractive online offers may appear, borrowers should proceed with caution. If you’re new to the mortgage process or aren’t accustomed to reading a loan estimate, you can easily end up paying more than you think. And with some companies, the low interest rates aren’t guaranteed. You could be several weeks into a transaction and suddenly find out you aren’t eligible for the rate you expected.
With online lenders it may also be difficult if not impossible to find a personalized experience. It’s true that many online lenders employ loan officers you can speak to on the phone, but beware that with some companies, the person you’re speaking to isn’t necessarily experienced. You could also find yourself being passed from person to person, and when entering one of the biggest financial contracts of your life, having a single, trusted point of contact is invaluable.
And possibly most important, in today’s competitive market, sellers tend to steer clear of offers that include financing from online lenders because of the uncertainties and potential mishaps.
“Name recognition and reputation go a long way, so working with a local lender can strengthen an offer and give buyers a competitive edge,” said Ben Clark, mortgage lending specialist with Dark Bank. “Listing agents and sellers want to be assured that the buyer is working with someone who has a record of getting deals done, and someone they’ll be able to easily get in touch with when needed.”
Ask the right questions
The best way to start your lender search is to ask for referrals from family, friends, and/or your REALTOR®. The Consumer Finance Protection Bureau recommends talking to at least three different professionals to ensure you are making an informed decision. And when meeting with potential lenders, Freddie Mac suggests you “ask questions like you are the hiring manager for a Fortune 500 company.” Here are some examples to help kick off the conversation:
· How long have you been working as a mortgage professional?
· Do you have experience with borrowers in a similar situation to me?
· How do you communicate with buyers?
· What loan programs do you offer?
· What will my interest rate and annual percentage rate be?
· What is your process for pre-approval and closing?
· What is your average loan processing time?
· Can you estimate and explain your fees?
· Do you handle underwriting in-house?
· Are you going to hold this loan or sell it?
“And there should be just as much importance placed on the lender asking questions of the borrower,” said Clark. “In order to do our job effectively, we need to understand our clients’ unique situations. If a lender is not asking you questions and listening to your needs, it should be a red flag.”
In addition to asking questions and comparing interest rates and costs, Clark says buyers should also make sure the lender is someone they feel comfortable working with. After all, when you take on a mortgage, you’re entering a long-term relationship.
“Not only do you need to feel confident in the product you’re getting, but you also need to feel assured that you’re getting quality service,” he said. “Most people plan on being in a mortgage for 30 years, so be sure to work with a professional who is looking out for your best interests and someone who views the relationship as a true partnership.”
Explore all your loan options
When speaking with lenders, you’ll also be discussing available mortgage programs. Some lenders offer a wide range of products, while others specialize in only one or two types of home loans.
Adjustable-rate, 15-year fixed rate, 30-year fixed rate, FHA, VA, USDA – there are many options out there, but unfortunately, no one-size-fits-all approach. You may go into your meeting thinking you want one type of loan but walk out realizing there is a better option.
For instance, if the down payment is a concern, you may hope to secure an FHA loan. However, your lender may provide other options that better fit your needs like a low-down payment conventional loan, or the use of down payment assistance programs like those offered by MSHDA or the City of Lansing.
“A reputable mortgage company won’t try to sell you anything,” said Clark. “What they should do is lay out all the options, walk through the pros and cons, and help you assess which product is right for you. Our goal is to provide all the necessary information so our clients can make educated and informed decisions.”
To find a list of local lenders visit the Greater Lansing Association of REALTORS® website at www.lansing-realestate.com.
This article originally appeared on Lansing State Journal: 3 Tips for Finding the Right Lender and Mortgage Program
