When the time is right to buy a new home (or to refinance an old home), borrowers must learn how to select a mortgage lender. Comparing interest rates is one way to get started – and rates are undoubtedly important. But figuring out how to select the right mortgage lender for you is about more than rates; it’s about choosing the lender who best fits your borrowing needs. Consider a lender’s reputation for responsiveness, straight-forward guidance, personal attention, and expertise based on your specific situation. You want to work with a lender who can help you navigate the mortgage-lending process and closes your loan on time.
The process can be a little overwhelming. If you want to learn how to select a mortgage lender with confidence, review our tips below.
How to Select a Mortgage Lender
Mortgage rate offers aren’t hard to find – quite the opposite. They come by snail mail, by email, through online ads, and more. The lowest rates are indeed tempting. Just be aware that an advertised rate may not apply to your personal situation, and it may not reflect additional fees that can fluctuate between lenders.
Most mortgage rates, quoted as an Annual Percentage Rates (APRs), are based on the length of a loan (typically 30- or 15-year), whether it’s a fixed- or an adjustable-rate mortgage (ARM), and on your credit score (source). Rates may also fluctuate depending on your down payment and personal profile. For example, military service members may qualify for a discount.
When considering an advertised loan, be sure to read the fine print. For instance, mortgages advertised as “no closing cost loans,” while requiring less cash upfront, still have additional costs. The Consumer Financial Protection Bureau (CFPB) says those costs are usually rolled into the loan or interest rate.
Before shopping for a mortgage, understand your personal finance picture, determine your budget, and know your credit score, suggests the CFPB. The higher your credit score, the more likely you are to get a good rate.
Seek Out Recommendations
Ask people you trust for advice on how to select a mortgage lender, and request recommendations. Advice may come from your real estate agent, a friend, family member, or perhaps the place where you bank or invest.
Even with recommendations, however, it is important to do your own research (source). Ask lenders about their experience with specific types of borrowers. First-time buyers or people with past credit issues may need additional help. Learn whether a mortgage lender provides a wide variety of loans. For example, PrimeLending Kansas City is a Fannie Mae, Freddie Mac, and Ginnie Mae direct seller and offers a selection of conventional, FHA, VA, USDA, and jumbo loan products.
When asking friends or advisors for recommendations, learn why they like a particular lender or loan officer (source). In addition, read reviews and assess the reputability of the lender.
Next, contact at least three mortgage lenders, and request to meet each in person (source). You should be able to ask questions without applying for a loan. At the meetings, share basic facts about yourself and the kind of loan you want, and discuss any reasons you may not qualify for a loan. Ask for additional loan suggestions and the associated interest rates. It helps to bring related documents with you.
Use these meetings to get a sense of a loan officer’s communication style, and don’t ignore first impressions. Is the loan officer courteous and knowledgeable? Is he or she able to explain the process in a way you can easily understand? Do you feel comfortable with the lender or loan officer? Finally, ask how long the processes take for pre-approval, appraisal, and closing.
Select a Mortgage Lender
Once you’ve narrowed down your field of mortgage lenders, the CFPB recommends that you ask each for a loan estimate of the same kind of loan. This will help you compare your options. Check each estimate’s loan amount, interest rate, monthly principal and interest, upfront costs, lender credits, and the amount of cash you need to close. In addition, take a close look at how fees are handled. Will you pay fees upfront, or will they be rolled into your loan? How might that change the monthly payment?
Once you’ve compared loan offers, choose the lender who best meets your overall needs. That may or may not be the lender with the lowest rate. By taking the time to ask questions, meet lenders, and compare loans, you can finance your new home with confidence.
PrimeLending of Kansas City has been helping borrowers purchase and refinance homes for nearly 30 years. We offer competitive rates and fees, process loans locally, and close loans on time. And with cutting-edge technology and top-notch customer service, PrimeLending keeps borrowers informed every step of the way. When you are ready to select a mortgage lender, please give us a call at 844-701-5626 if you live in the Kansas City area.