For most of us, the challenge is not in finding a mortgage loan, but it’s sorting through the myriad of banks, online lenders, mortgage brokers and others waiting to take your loan application. So, how do you sort through the maze and choose which lender will offer you the best deal?
First, go to the bank or credit union where you already have a checking or savings account and ask what types of mortgage deals they offer currently. Plus, be sure to ask friends and family members for referrals to loan officers and mortgage brokers who not only gave them good, professional service, but helped find the best competitive loans. Remember, finding the best deal on a mortgage can be a challenge because fees and rates change daily, sometimes more than once a day.
The type of mortgage you may qualify for will depend on your credit history and credit score. Find out what you are likely to qualify for before you start looking, then approach mortgage lenders who offer the options you’re interested in. Reputable mortgage lenders can advise you on steps to take so you’re eligible for the best loan terms.
Always keep in mind that you’re not only buying a home, you are buying a very expensive financial product — a mortgage loan. In fact, if you were to take out a mortgage for $400,000, at 6.25 percent interest and keep that loan for the full 30 years, you would end up spending nearly $465,000 in interest alone! You deserve to be treated as a very special customer when you’re spending that kind of money.
Choosing a Mortgage Loan Lender!
Cut through the loan fog by shopping broadly and then narrowing your focus as you learn more about what type of lender makes you most comfortable. Begin to familiarize yourself with various lenders and the deals they’re offering by browsing the different types of lenders below:
Mortgage bankers make money by selling mortgage loans soon after funding them. They often offer attractive rates since they make their money on re-selling the loans. In general, banks have the fewest options available because they offer only their own products, but they may be more flexible if they’re lending their own money – and they may make a deal if you have substantial assets.
If you’re comfortable using a computer for financial applications, you can comparison shop and apply for mortgages via some lenders’ websites. Just make sure your personal information is encrypted (see resources below) and that mortgage applications are legitimate.
There are pros and cons in deciding between an online mortgage lender versus going with a local or international bank or credit union. Which is a better option for you – an online mortgage lender (like Quicken Loans) or a traditional mortgage provider (e.g., Wells Fargo, Bank of America, Chase or your local bank/credit union)?
To better answer this question, there is at least five key question that you need to answer:
- Which is more important to you – the lowest mortgage rates available or having access to a mortgage broker who will walk you through the entire loan origination, processing, and closing?
- Are you looking to get pre-approved first?
- Are you looking to close on your loan within a 30-days?
- Are you comfortable with the online process or do you prefer in-person meetings?
- Do you prefer to have most, if not all, of your financial accounts (e.g., loans, checking/savings account, and credit cards) with one or just a few financial firms?
At the end of the day, it all comes down to your personal preference. In regard to pre-approvals, most online mortgage lenders ( like their brick-and-mortar competitors) do offer pre-approval options. See our full article about Online Banking.
One important decision you’ll have to make is whether to pursue a mortgage on your own or to use the services of a mortgage broker. While a good mortgage broker can shop your loan among several lenders, it’s important to understand that brokers don’t have special access to deals that are unavailable elsewhere. And a broker is not obligated to find the deal that is best for you. Some have been known to pair a borrower with the mortgage that offers the broker the greatest profit, instead of the lowest cost to the borrower.
Loan programs will vary from one lender to the next, and it can be challenging to shop around among the many lenders. Mortgage brokers have easy access to a large number of lenders and can use their knowledge of the many mortgage offerings to find a loan that matches your profile and needs at a favorable rate. Brokers do not approve the loan themselves; they find a lender who will approve the loan. The broker then adds his fee to the wholesale rate, and in the end – you (the borrower) should get the best rate available. If they can’t do this find another broker.
In today’s market, it’s not always entirely clear if you are working with a mortgage lender or a broker. Don’t be afraid to ask your mortgage company if they act as a lender or as a broker. Regardless of which type of institution you deal with, it is important to find an individual loan officer or broker that you are happy with, and can trust.