Before you purchase a new home, you will have to find a mortgage lender to obtain a loan from. Buying a home means you’re in it for the long haul. Your mortgage term is going to be between 15 and 30 years. It’s crucial to shop around and try to find the best deal on a mortgage you can. To get a head start on the mortgage loan process, below are some top tips to help you find the best lender for your needs.
1. Get Your Credit In Tip-Top Shape
Not everyone who wants to purchase a home can qualify for a mortgage. To get approval, borrowers have to meet certain income and credit criteria to assure a lender they can repay the loan. If you have a low credit score, it will signal the lender that you are high-risk. If you do get approved by a lender, your credit score will determine the interest rate you may get. Typically, higher credit scores get the best interest rates.
Before applying for a mortgage loan, check your credit report see if any discrepancies or issues are needing to be fixed. If you have time before you have to buy a home, consider working with a credit counselor to raise your score so that you will get a better deal on your loan.
2. Understand Lending Landscape
The lending field can feel quite crowded when trying to compare all of the different types of home lending institutions. Here are some of the most common:
•Mortgage bankers- These lenders work for specific financial institutions. They will package loans for borrowers to be considered by the institution’s underwriters.
•Credit unions- These financial institutions are member-owned and often offer borrowers a favorable interest rate over shareholders.
•Mutual savings banks- These are a type of institution very focused on specific loan products. Mutual savings banks are very competitive.
•Savings and loans- These used to be the top method of purchasing a home. Today, they are harder to find and are often smaller, community-based financial institutions.
•Correspondent lenders- These are the lenders you will often find through local mortgage companies and use their resources to make your loan. However, they often rely on bigger banks to sell your mortgage immediately.
Before you start looking at homes to buy, you should get a mortgage pre-approval. This will give you an idea of how much house you can afford and can give you an edge when bidding against other buyers. The pre-approval letter will also show that you are a serious buyer who will most likely have no issues closing on their loan. Most lenders require information for a pre-approval such as your social security number, financial accounts, debts, tax returns, income information and how much down payment you will be able to come up with.
4. Compare Rates
Many people choose to search for mortgage rates online. However, it is important to note those rates are often only estimates. To get an accurate rate, you will need a lender to pull your credit score and process your application first. Obtain application rates from multiple lenders to compare before making your final decision.
5. Read Fine Print
Once you have your quotes to compare from different lenders, you will want to start by reading the fine print of all your loan documents. This will tell you information such as who has to pay closing costs, the closing date, the exact terms of the financing and whether there is a home inspection requirement.
6. Ask Questions
Before choosing a lender for your mortgage loan, ask questions such as how they communicate with their clients and what the down payment requirements will be. You may also want to inquire about turnaround times for the appraisal, pre-approval process and the closing.