Purchasing or building a home is a big decision and a huge financial investment. It is perhaps one of the largest financial investments of your lifetime. That said, you want to know you’re working with the very best mortgage lender for your specific circumstances and budget.
The home-buying process can be extensive and complicated, especially with a subpar lender. You can also find yourself on the wrong end of predatory lending practices which can financially ruin your family costing you substantial amounts of money.
It’s important to know that you can’t just choose the first lender who pops up when you search ‘best mortgage lenders near me.’ While it may be tempting, the fact that they’re on the top of the search results only reflects a great marketing team and not necessarily great lending practices.
Whether it’s your first home purchase or your first in a while, here’s what you should look for in a mortgage lender before choosing to partner with one.
Getting Ready to Search
Making the decision to purchase or build a home is only the first step in the process. Before you run out and begin searching for mortgage lenders, there are a couple of important things you need to do. Get your credit right, get your money right, and know your needs and preferences. Not only will this make the entire process quicker and smoother, but it can also save you tens of thousands of dollars in the process.
A home purchase typically requires a credit rating of at least 650 but a higher credit rating can improve the process and save you a ton of money. A 700 credit score will save you thousands in interest payments over the life of the loan and virtually ensure your loan closes. However, a credit score of 740 gives you access to the very best mortgage programs and interest rates.
It’s always important to have money put back for a rainy day. A home purchase means you’ll need a sizable down payment. The higher your credit score is, the less lenders require down. Aside from the down payment you’ll also need to ensure there is plenty of money in your monthly budget for a house payment.
Needs and Preferences
You need to be aware of these before you start shopping for lenders. Some people prefer to work with a lender face-to-face while others opt for an online experience. Some people want to be very involved in the process from start to finish while others want to write a check and get a key.
It’s important to know what type of process you want to engage in for your home purchase and this will give you a good idea of where to start looking for lenders.
Gather Key Information
When starting your search for a mortgage lender it’s critical that you gather key information beforehand. You won’t know you’ve found the ‘best mortgage lender near me’ until you have something to compare them to.
You should know what the current interest rates are for home buyers. This is public information and there are sites that publish this information daily. It’ll also help to at least have an idea of the type of mortgage product you are interested in. Here are some of the most common:
- Fixed Rate Mortgages
- Adjustable Rate Mortgages
- Specialty Programs like neighborhood mortgage loans or construction loans
- VA Home Loans (for active military and veterans)
- FHA Home Loans
- Rural development Mortgages
There are many more types of home loans and mortgage lenders will offer some of these options. Knowing which type of mortgage you may be interested in can help you narrow down your search parameters a bit.
Somewhere to Start
If you have an established relationship with a local bank or credit union, it is usually a good idea to start there. They often have special terms that only established customers can access, and this can save you thousands. Plus, they already have many of your financial statements which can help speed up the process.
You know what the interest rates are, and you have a pretty good idea of the mortgage programs you’d like to explore. You have also determined that you’d prefer to complete a good portion of the process online as opposed to face-to-face, which gives you a really good place to start. Now you can see if your local bank or credit union offers these products and an online process.
Ask Key Questions
Once you’ve narrowed down potential mortgage lenders or chosen to work with your local bank, there are a few questions you should ask before proceeding. If you are satisfied with the answers, then you can proceed to a pre-approval and start shopping for your house, but you don’t want to jump the gun here. Get the answers to these questions before proceeding to ensure you have practical expectations for the process.
- What is the average closing time?
- Who will be my main contact throughout the process and will that person change?
- How do I communicate when I have questions or need help?
- If I lock my interest rate and the loan isn’t closed on time, will I be charged for an extension?
- Do you charge points on a mortgage, and do I need them all? Can I negotiate points?
- Will you please explain all associated fees charged on your mortgages?
- Do you offer any down payment assistance programs and if so, how do I qualify?
Go House Shopping
Once you have narrowed down your selection to the best mortgage lender, you can get your pre-approval and go shopping for a house. Getting pre-approved is an important step in the process. It lets you know approximately how much house you can afford and shows sellers that you are serious when you put in an offer.
They know they are not wasting time with window shoppers. When multiple offers are submitted on the same home, it is most often those buyers who have been pre-approved that get the most serious consideration.
Search for Mortgage Lender
Now that you understand how to search for the best mortgage lender, you can start the process today. Buying a house is a huge financial commitment and making informed decisions helps ensure an adequate return on your investment.
While the process can be a little extensive, it is well worth the effort to get the very best deal and purchase a home you love. Unfortunately, you can’t just do a Google search for a mortgage lender and choose the one at the top of the search results. You’ve got to do a little digging and information gathering to ensure you find a really great lender. Start your search and find the mortgage lender.