Finding a mortgage lender is one of the first steps in becoming a homeowner. This step is one of the most significant decisions you’ll make in the entire house buying process. Keep in mind that you will be doing business with that lender for the next several decades.
Choose the lender that suits you and your specific needs. Read on the article to know the tips for finding the best mortgage lenders. Do remember that mortgage lending requirements and regulations may vary from state to state and around the globe, so check with your local lenders for more information.
4 Tips for Finding the Best Mortgage Lender
To get started with your mortgage loan process, below are the four steps in finding the best one for you.
1. Check Your Credit Score Before Research
Generally, if you have a credit score of below 580, you will have a hard time qualifying for most types of mortgages. Having a bad credit score means that you are a risky borrower and also means a higher interest rate for your home loan.
A good credit score, on the other hand, signifies that you are a trustworthy borrower who makes more on-time payments. Thus, you will have more power to negotiate for better rates with potential lenders.
With this, you need to know your credit score before your research. You can get your report from the three major credit bureaus: TransUnion, Experian and Equifax. Each bureau is required to provide you a free copy of your credit report once every 12 months.
If you have a bad credit score, try to do some actions to improve it. First, you need to make sure that all the information in your credit report is correct and free from errors. If you find any errors, correct them.
The next thing to do is to pay high-interest debts to lower your overall level of debts as fast as possible. Doing so will improve your debt-to-income ratio. Also, paying your debts before purchasing a home can free up some money for the down payment.
2. Make your research
Finding a lender could be likened to hiring any other professional. Reach out to your network of connections to see if anyone has someone to recommend. Your friends, relatives and even your real estate agent may know someone who can help.
For each recommendation, check them out online and read reviews about them. This will help you form a list of the top contenders.
The next thing to do is to call each one and interview them about their services. The interview doesn’t need to be formal but make sure to spend enough time talking to each one so you could get a sense of what working with them may be like.
Here are some questions you could ask:
- What are the loan programs that they offer?
- What is the required credit score to qualify for a loan?
- How much is the down payment?
- Do they have buyer assistance programs?
- What are and how much are the fees if I work with the lender?
- Do they service their loans in-house?
- How long can they lock in an interest rate and how much is the fee?
Pay close attention to how well your inquiries are received and do not hesitate to ask additional questions. After interviewing each one of them, narrow down your list even further.
3. Get yourself preapproved
Getting a mortgage preapproval letter will give you an advantage when bidding against other buyers. This means a lender has evaluated your finances and figured out how much house you can afford. It will also tell that you are a serious buyer.
Moreover, getting preapproved will also save you some time. When you are ready to buy a house, lenders will already have the information to process your home loan.
To get preapproval, you need to provide some financial information to the lender. Here is a list of most requested items to guide you through:
- Your Social Security number and that of your co-borrower/s
- Savings account, bank account, checking and investment account information
- Outstanding debt obligations like credit cards, student loans, car loan and other balances
- Two years of tax returns, W-2s and 1099s
- Your salary and employer information
- How much is the down payment you can make and where is the money coming from.
If possible, get yourself preapproved by more than one lender. It will help you determine which of them offers the best rates and terms by comparing their Loan Estimate forms.
4. Compare Mortgage Rates from Several Lenders
You can compare rates by searching online. However, keep in mind that the rate you see online is just an estimate. To give you an accurate rate, the lender or broker need to pull your credit information and process a loan application which you can lock in if you are satisfied with the product.
Once you have several quotes, compare the costs and decide which one best fits you and negotiate for the best rates possible.
Takeaway
The thought of buying and owning a home can be exciting. This process will go smoothly as long as you do your research and work hard to come up with the best lender. Choosing a lender to handle your loan is one of the most important decisions you will have to make. It is easy to find a mortgage lender but it needs work to find the right match for you.
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