How to Choose a Mortgage Lender

How to Choose a Mortgage Lender

Finding the right lender will help you find the right mortgage.

One of the most exciting (and stress-inducing) events in life is house hunting. Seeking out your next sanctuary can certainly put stars in your eyes, but there is also a major milestone that almost every home buyer has to face. It’s a little less glamorous and a lot more reality-based. It’s finding a lender. If you’d rather shop for a home than learn about how to choose a mortgage lender, you are not alone, but unless you are sitting on a pile of cash, the fact is that if you’re in the market to buy a home, you can’t have one without the other.

A good lender will take many things into account and make realistic, tangible recommendations to help you to set a price range and shop for a home more consciously. But finding and choosing a mortgage lender can be tricky. Lenders come in all shapes and sizes and in all kinds of locations to boot. The more obvious lender might be your current bank, but credit unions can also fill the role. In addition, there are financial agencies that are dedicated solely to helping consumers finance properties, including homes.

Knowing what a lender is and how things operate are two different animals. Here are a few more pointers for anyone in the process of or considering shopping for a lender.

How to Choose a Mortgage Lender

1. Know your local real estate market.

Bear in mind that this doesn’t have to be painful, but it can save you a lot of pain in the long run. It’s simply good sense to know what you’re getting into when you are choosing your lender and location. Where do you want to live? What are the median and high/low price ranges in that community? What is the current vacant home supply and demand? Knowing this information ahead of time will help you more than you might think. If you are looking in a high-demand area, chances are homes will sell faster and for a lot more money, potentially with bidding wars that can price you out of the home, you thought you would be getting. You can get an idea of what your local market is like with Trulia’s real estate overview page.

2. Know your financial numbers.

There are some important numbers you should gather ASAP when you know you will need to find a lender. The primary source every lender will look at when determining your loan eligibility is a little thing called your credit score. Credit scores take standard factors into account such as your student loans and a current mortgage (if you have one). But more than that, your credit score will reveal if you have any unpaid credit cards or loans, anything in default or anything that has gone into collection during the past seven years. The standard rule of thumb is that a credit score of 700 or higher is considered “good.” This means you will be eligible for a better interest rate and a better loan. If you check your credit score and it’s less than desirable, there are ways to improve it. Organizations like the National Foundation for Credit Counselling (NFCC) can help you figure out what steps you can take to improve it.

3. Don’t be afraid to get a little social.

Chances are, you’ve asked friends and family for advice or recommendations in the past, so why should your mission to find a lender be any different? When you reach out to them, you can find out things like their current interest rate and possible refinancing opportunities. But beyond that, you can also find out the overall experience they have had with the lender: such as their transparency, accessibility, and if they offer incentives for things like going paperless. If you’d rather not involve your friends and family, you’re still in luck. You can tell Trulia Mortgages what’s important to you and get matched with the best lenders in your area.

4. Make sure you shop around.

While it’s probably appealing to take the first offer and run with it, the more prudent approach could save you in the long run. Like snowflakes, no two lenders are the same. And, most likely, no two lenders will offer you the same loan amount or interest rate. This might feel like an extra step and an unnecessary move, but a “second opinion” about your loan terms and amount could reveal a lot more than you think. Take notes when you are doing your initial research and talking with others and make a list of organizations that pique your interest. Make a list of your top three and then compare notes.

5. When in doubt, try to remember to be realistic.

Let’s say you find a lender and you qualify for a mortgage that far exceeds your budget or expectations, or, you go through the process of pre-approval and learn something similar. First off, congratulations. But, second, you may want to pump the brakes before taking it all. An age-old tip rings true even today: just because your lender has approved you for it, that doesn’t mean you should take it all. Do you have a full picture of the true cost of the home that goes beyond the price tag? Heating, cooling, taxes, and maintenance of the home are just a few items that add up quickly. If the home is older, are there any potentially costly repairs that will need to be made such as wiring or replacing a heating and cooling system? Meanwhile, if it’s a large home, ask yourself how much house you need and what do you plan to put into its rooms. The so-called “big house with no furniture” is a reality for some, and if you can’t afford to maintain it, it could be your reality as well.

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