If you’re shopping for a mortgage, don’t go with just any lender. Your bank is a natural first place to look for a loan, but it shouldn’t be the only lender to evaluate. Let’s take a look at how to choose a mortgage lender and the steps you can take to make that decision.
1. Get at least three quotes. Plan to obtain quotes from at least three lenders besides your bank. A local community bank, your credit union and one or more online lenders are good places to start. Evaluate a greater number of lenders for a broader comparison.
2. Contact each lender. Beginning with the first lender on your list, contact the provider’s mortgage representative and explain that you are interested in obtaining a home loan. Ask this lender what types of mortgages are available and the interest rates offered. Those rates will likely depend largely on your credit history, your employment and other personal factors.
3. Discuss fees and closing costs. After you obtain interest rates and terms, you’ll want to determine how much you’ll pay in closing costs. That amount varies across the country, with Bankrate.com reporting a national average of $2,748. In North Carolina, that amount is $2,441, as an example of one state average.
4. Discover loan closing details. How long will it take this lender to close your loan? This answer can vary, but if you can get your paperwork in quickly (income tax returns, pay stubs and related information), then closing can take place in as little as 10 to 14 days.
5. Contact additional lenders. Now that you have the hang of speaking with a mortgage representative, repeat the process with each of the lenders on your list. Take notes and when you’re done interviewing each lender, then you’ll have the tools to make an informed decision.
Final Thoughts
Compare like mortgage to like mortgages. For example, if you’re shopping for an adjustable rate mortgage, do not compare a 5/1 mortgage to a 7/1 mortgage. You won’t be able to make an accurate evaluation without an exact comparison to review.
Also consider running a credit check on yourself before applying for a mortgage. If there are problems on your credit record, you’ll want to resolve these issues before seeking a loan. Dings on your credit can affect your credit score and any score that isn’t in the mid-700s may mean that you’ll have a more difficult time obtaining financing and at a favorable rate.
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