You have to shop around to find the best mortgage lenders. Take various choices such as your bank, local credit unions, lenders, and more.
Ask each person about rates, lending terms, down payment, property insurance, closing costs, and all kinds of fees, and compare this information on any bids. You should take a few steps to get the best rate before you start shopping.
You buy a house and a mortgage is required. But how do you select the best mortgage lenders who offer the best price and the best service in what is potentially your life’s biggest purchase?
Types of Lenders
Direct lenders
Direct lenders are banks, credit unions, online companies and other companies that offer mortgages directly to consumers, so you do not have to pay the mortgage broker to shop for the best fees. With a direct lender, you can do it for free.
Mortgage brokers
Mortgage brokers are independent, licensed professionals who act as competitors between borrowers and borrowers.
Correspondent Lenders
These lenders create and finance their own loans, buy and sell them quickly to larger lenders in the secondary mortgage market once the loan is completed.
Wholesale lenders
Unlike direct lenders, wholesale lenders never contact borrowers. They usually work with mortgage brokers.
1. Determine your budget
An important part of finding the right mortgage is having a good handle on how much home you can afford. Lenders can qualify your budget as a maximum loan and not shake you up for unforeseen expenses, but taking out such a mortgage can be a bad financial move.
Lenders allow you up front based on your total income, outstanding loans and revolving loans, Bates says. However, they do not look at other monthly bills such as utilities, gas, day care, insurance or groceries in the calculations.
To get an accurate idea of what you can do, factor in these types of expenses and your other financial goals. Look at your monthly net income to calculate how much you should spend on the mortgage.
2. Know your mortgage options
An important aspect of finding the best mortgage lender is being able to speak their language, including knowing the different types of mortgages. Some explicit research will help you to separate mortgage facts from fiction.
Many lenders offer regular loans as low as 3 percent, and some government insurance loans do not require a down payment, while others require a 3.5 percent reduction.
3. Compare rates and terms from multiple lenders
Setting up the first lender you talk to is not the best idea. In fact, you want to evaluate with different types of lenders – banks, credit unions, online lenders and local independents – to make sure you get the best deal on rates, fees and terms. You should try to find a lender who can contact you the way you want, whether online, via text or in person.
4. Get approval before the mortgage
Applying for a mortgage pre-approval with three or four different lenders, or the mortgage broker doing this work for you, compares apples to apples related to loan offers. This is the only way to get an accurate loan price because lenders do a thorough review of your credit and finances.
Lenders may have different documentation requirements for prior approval.
5. Strengthen your debt
Long before you start applying for mortgages, check your funds and adjust them if necessary. This means pulling out your credit score and credit statements.
Having a solid credit score allows you to rely on lenders to repay your loans on time, so they will be more comfortable doing business with you and paying you favorable fees to seal the deal.
In addition to solid loans, lenders want to see if you can handle your existing debt with the new local mortgage lender, so they will look at your loan-to-income ratio.
