The median home price in the US is over $225,000. Very few people can afford to just buy their house outright. Some people even have to save for years to be able to make a decent down payment.
That’s why most people turn to mortgage lenders when it comes time to buy their first house or even when they need to move again.
If you’re thinking about buying a house any time soon, you probably want to be sure you’re working with the right mortgage lender. Picking mortgage lenders can be tough, because there’s so many of them out there.
Before you take out a mortgage with anyone, you’ll want to think about these eight factors. They can help you make sure you pick the absolute best lender.
1. Ask about Their Products
The first thing to do when you’re trying to pick a mortgage lender is to look at what they offers. There are many different kinds of mortgages out there. Does the lender offer the one you want or need?
The size of loans matters for some programs. Conventional mortgages backed by Fannie Mae or Freddie Mac have to be within certain ranges. Otherwise, they might be considered “jumbo mortgages.”
If a lender isn’t willing to extend a jumbo mortgage, then you wouldn’t be able to buy the property you want.
Some lenders might work with the USDA home loan program. This program can help you buy a home in a rural area. It also lets you skip the down payment.
Again, not every lender will offer USDA loans. If you want to use that program, you’ll need to find a lender who does offer it.
2. Compare Rates and Fees
Next up on the list is comparing lender rates. Rates can vary quite a lot. Different types of loans will have different rates, but lenders can also offer different APR than their competitors.
Rates may also change, depending on your credit score. Someone with a good credit score will get a better rate offer than people with poor credit.
You’ll also want to think about fees and the overall cost of the mortgage. Some lenders will advertise low interest rates, but they’ll charge high fees. You could end up paying more for the mortgage if you’re not careful.
Don’t forget to look at the long-term costs as well. A fixed-rate mortgage might have a higher interest rate to start, but an adjustable-rate mortgage might end up costing more over the long run.
3. Look at the Lender’s Reputation
As you research mortgage lenders in your area, you might want to ask friends and family for recommendations. Who have they worked with? Did they have a good experience or a bad experience with any particular lender?
You can also take a look at references and reviews online. The lender may have reviews on their own website.
If you can find third-party reviews on another website, take a look at those too. You can find reviews on Facebook, Google, and other websites.
Don’t forget to check in with the Better Business Bureau either. They often have open and honest reviews, and they can tell you if a lender is in good standing.
4. Think about Speed When Picking Mortgage Lenders
Now it’s time to actually start talking to lenders. One thing you should keep in mind as you get in touch with various lenders is their speed.
How quickly do they get back to you? Can you get them on the phone or make an appointment right away? Does it take a few days for them to get back to you by email, and then you need to wait a week to schedule an appointment?
Speed is often of the essence when it comes to closing real estate deals. You don’t want your deal to collapse because your lender wasn’t fast enough at getting your mortgage paperwork in place.
A slow lender may have too many clients or not enough staff members. That can cause other issues too.
5. Evaluate Service and Interaction
Speed is one part of the bigger customer service picture with any mortgage lender. As noted, a slow lender might not have enough people on staff. They might have too many clients to deal with everyone effectively.
That can make dealing with your lender a frustrating experience. You may feel they ignore you or that they never have time for you. Maybe they don’t answer all your questions or they brush you off.
In some cases, lenders who have too many clients are too formal. They don’t make a personal connection with you, and their interactions aren’t very pleasant.
A mortgage is a big commitment, spanning 25 or 30 years. It’s also how you keep a roof over your family’s heads. You want to work with a lender who cares about you and your family, and their customer service should show they care.
6. Look at Different Types of Lenders
At this point, you’ve probably thought about going to the big banks for your mortgage. Are they the only type of lender you’ve looked at?
You might be surprised to know that you have plenty of options for lenders. You’ll want to think beyond the big banks. Try contacting:
- Mortgage brokers
- Credit unions
- Correspondent lenders
- Private lenders
Correspondent lenders are private financiers who back the loan. When the deal closes, they sell it to a larger company.
There are other private lenders who will make mortgage loans. A broker can help you get in touch with private lenders, and they can also help you find the best rates.
Credit unions are often an alternative to the big banks. They’re more consumer-focused, so they may be somewhat more flexible in their terms.
What about online lenders? You’ll need to be very cautious about who you choose to work with. While some online lenders are reputable, others advertise rates and terms they don’t uphold.
7. Can They Help You Improve Your Credit Score?
If you’re having trouble getting a mortgage, it might be because of your credit score. You might feel like this limits your options, and you’ll need to go with whichever lender will offer you a loan.
That isn’t necessarily true, especially if you’re not closing on a property any time soon. Instead, look for a lender who can help you improve your credit score.
The lender should be able to tell you which factors will make the most difference. They can also help you come up with a plan to improve your score before you want to apply for a mortgage.
8. Shop Around for Pre-Approvals
Now you’ve probably done some online research. You’ve compared plenty of rates and fees, and you’re looking at reviews and references. At this point, you’re hopefully looking at different types of lenders as well.
Exploring all your options is key to finding the right lenders. Talking to them is important too. You need to be able to evaluate their customer service.
If you’ve done all that, you might think you’re done “shopping around.” You should take your lender comparison one step further though. Go ahead and actually get pre-approvals from them.
Why is it important to actually get pre-approved by various lenders? Pre-approvals are a key tool to have when you walk into a buying situation. Sellers tend to favor buyers who have pre-approvals, because it speeds the closing date.
You should get a pre-approval so you know exactly what your lender will give you. Many lenders will make great offers, but you can’t actually hold them to it until you’re pre-approved.
That means you can have reassurances from any lender about how much mortgage they’ll give you or what rate you’ll get. When you actually go to get the mortgage, though, you’ll find out they can’t get quite as much loan as they thought or they can’t offer the same rate.
Pre-approvals confirm exactly how much mortgage you’ll get. They also lock in the interest rate, sometimes for months at a time. This gives you time shop around, all with the peace of mind that the lender can give you exactly what they said they would.
Getting pre-approvals from several lenders can also help you compare actual offers. That way, you can pick the lender who is the absolute right fit for your needs.
Make Your Family Home Dreams Come True
Picking mortgage lenders can seem a bit overwhelming at first. By thinking carefully about these eight factors, you’ll be in a much better position to choose the right lender.
With the right lender on your side, you can get the home you’ve always wanted for your family. Whether you’re welcoming a new baby or just need some more space for the kids, the right mortgage lender can make it happen.
Looking for more advice about money management with kids? We have it in spades. Check out the archives for more helpful tips!