Choosing a home lender can be an intimidating process, especially for first-time buyers. However, the same hallmarks can be found with the most reliable lenders and basic research such as comparing rates is the key to finding the best possible home lender.
At the same time, you need to pick out a lender that can provide you with a loan to match your criteria. After all, you will be paying back this loan for many years to come and the last thing you want is a loan which is not designed to meet your future needs.
In this article, we consider what you should know about choosing the best home lender for you.
What You Should Know Before Choosing a Home Lender
The truth is, not all mortgage products or home lenders are created equal. Some lenders will have stricter guidelines than others, and some institutions require as little as 3% of the purchase price in terms of the down payment. What’s more, some lenders insist on an immaculate credit score, while others focus on borrowers that might not have the most impressive credit profile.
As for the types of mortgages, you will find six main types of mortgage with USDA loans and VA loans being the most common alternative to a conventional mortgage. Just so you know, USDA and VA loans refer to zero-down payment loans which the federal government guarantees for individuals that meet a very specific eligibility criteria. When it comes to conventional loans, most home buyers choose between an adjustable rate mortgage (ARM) and a fixed-rate mortgage.
Adjustable mortgages have a fixed rate at the beginning but this rate will fluctuate according to market conditions after a specified number of years. ARMs are considered riskier in this regard as some buyers may not be able to keep up with the payments when this happens. However, ARMs have a lower rate of interest in the first few years which means they are often more suitable for buyers that wish to refinance before the initial loan has reset. Meanwhile, fixed rate mortgages have a set time frame and monthly payment. While the monthly payments are higher, the loan can be paid-off much faster.
Either way, before you proceed with a home lender, it’s important to crunch the numbers and know the best type of mortgage to suit your circumstances.
5 Quick Steps to Choosing a Home Lender
You will find many institutions operating in the home lending industry but not every organization will be able to help you. For instance, Mutual Savings Banks are “thrift” institutions that focus on assisting individuals in the local community and Correspondent leaders are loan companies which rely on bigger lenders. Meanwhile, mortgage bankers package loans for specific financial companies and credit unions can also help members with sizable loans and competitive interest rates.
Here’s a quick guide to picking a home lender that will suit your needs:
- Know the Score – Check your credit score before you do anything. It’s important to know where you stand before approaching a home lender for advice or assistance.
- Check Registration – Check the license registry to ensure each lender is fully registered in your state.
- Compare Rates – Request quotations from as many mortgage lenders as possible and compare rates at the very least. Remember that finding the cheapest lender is not the aim but price certainly matters. Use this research as leverage to acquire a better price.
- Consult Friends/Family – It’s not a guarantee but testimonials are often helpful for finding a decent home lender. As friends and family, and check online reviews for first hand feedback.
- Ask the Right Questions – Ask as many questions as you possibly can. What is the turnaround time for approval? What commission, points or lender fees will you need to pay upon closing? Can these fees be rolled into your mortgage? What is the requirement for down payment?
As you can see, finding a suitable home lender is all about research. It’s best to start this process long before you even think about making any offers on a home and this will also help with speeding up the actual buying process. After that, comparing rates is the first step toward choosing the best institution and product, and taking your first steps toward owning your very own home.
To learn more about mortgage rates, call City Creek Mortgage and speak with one of our salary-based loan officers.