Really? This is probably the easiest one to explain. Pick me. OK, all kidding aside, the approach to finding a mortgage lender is pretty much the same as that of picking a realtor. To start, ask those within your circle of influence. Who do you know that recently has bought, sold or refinanced a home: a family member, friend, co-worker? I am confident that in the last year someone you know has either bought or sold a home, or refinanced their mortgage. If not, you could ask your accountant or tax preparer, financial advisor, lawyer, or your employer.
Another option is to check with your bank where you do your everyday transactions. You may also want to do a search on the internet. Many lenders have websites with great information on rates and products available. Some even let you provide your information online so that they may begin the process.
Once you have identified a few mortgage lenders, then you will want to meet them. Understand that the lender will want to get a copy of your credit report to see if you have a credit score, what it is, and what type of history you have. Be cautious: if too many lenders pull credit at the same time, it can decrease your overall score. If the initial lender you meet with pulls a credit report, ask for a copy of the disclosure that shows your score and have them review it with you. This way, you can discuss it with the other lenders you will meet with and they won’t have to pull it again until you are finished shopping around.
Next, set appointments with two or three loan originators. Not every lender has the personality or experience that works with your requirements, so this is the step to determine the one with whom you will be comfortable. You should prepare a few questions to help you decide which lender to choose. Use these questions as suggestions, and come up with some of your own.
- Ask how long they have been a lender and request their NMLS (Nationwide Mortgage Licensing System) number. All mortgage lenders have to be registered.
- If you are a first-time homebuyer, ask if they work with first-time buyers and what programs they have available. Some lenders have specific programs to help you.
- Ask the lender where their loans are processed. This is important, because you want to work with someone who knows your market. If they have a local presence from their operations team, they will understand special requirements or needs in a particular area.
- In discussing home-buying scenarios, the lender will likely talk about a rate. Ask for the APR, Annual Percentage Rate. This rate reveals the cost of your transaction and it is what you will use to compare one lender to another. This will show if you are paying additional costs to get the rate offered or if there are high mortgage insurance fees.
- Finally, ask the lender if they go to the closing. Why is this important? Because you want your lender to be involved from beginning to end and beyond. Some lenders just take the application and forget all about you. You want to work with someone who will be there to help even after you close.
I teach a lot of first-time home-buyer workshops, and the one step I always suggest to customers is to prepare a budget. This allows you to determine what monthly mortgage payment you are comfortable with. When a buyer comes to me I always ask them if there is a payment they have in mind. Don’t let the lender tell you how much you can afford. If you come to me and ask me how much you can afford, my response will be: “I don’t know.” This is your decision, just as it’s your decision to choose the mortgage lender who will work best for you.
What traits do you think are important to have in a mortgage lender?