4 Steps to Finding Your Mortgage Lender

by Carrie Kirby on 20 July 2015 (0 comments)

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I vividly remember signing my first mortgage agreement, my hand trembling slightly as I held the pen. It’s a lot of money to commit to paying back! Since that day, between refinances and new purchases, I’ve signed or e-signed for a total of seven mortgages. It got easier because after going through the process a couple of times, I learned how to feel confident I was working with the best possible mortgage lender and getting the best deal I could. These are my tips on finding the best lender for you.

When it comes to a mortgage, everyone has different needs. See which products make sense for you:

Compare Rates

When you’re shopping for a home, price is just one factor among many more personal choices such as floorplan and neighborhood. But with the mortgage, let’s be frank: Price is the main factor in your choice.

I keep an eye on the general trend of mortgage rates in the financial news, then check Bankrate.com to get an idea of the range of rates available.

Comparing rates can be challenging because it’s not always clear what a listed rate includes. Banks may charge a higher percent interest for a zero-fee loan, where the borrower’s costs are wrapped into the mortgage. Another problem with consulting lists of rates is that your individual circumstances affect what rate is available to you. For instance, for my family’s current home, in the high-cost San Francisco Bay Area, we needed a jumbo loan, which costs slightly more than a standard, or “conforming” loan.

One way to get an accurate idea of what your mortgage should cost is to use a rate calculator like the one at The Mortgage Professor. Then you can contact lenders and ask for their best rate/fee combinations; if they charge more than the amount you saw on the rate calculator, ask why. Just like any transaction, it pays to shop around and ask lenders to match or beat other lenders’ prices. For my most recent refinance, I got three quotes, and one of the lenders offered to match the lower fees quoted by another lender.

Decide What Type of Lender You Want to Work With

You could take out your mortgage with a major bank, with a credit union, or with a company that specializes in mortgages only. Many of that last category operate online instead of having offices you can walk into.

Online-only lenders may advertise lower rates than other lenders, but remember that you could always ask the lender you like best to match that rate, so which kind of lender to work with isn’t solely a rate decision. Rather, it’s a decision about who you feel comfortable with and about how you want to get through the paperwork, which is likely to involve little actual paper with an online lender.

“Online financing is popular with tech savvy consumers and can be a convenient alternative to traditional lending sources,” writes Forbes contributor and industry insider Mark Greene.

Then again, you might get less personal attention working with an online lender than you would with your local bank.

Personally, I have taken out mortgages sitting in a lender’s office, and I have also done them through a lender with which I interacted solely by email and phone. The latter advertised lower rates. Employees with the first lender spent more time explaining things to me, while the employees of the second company could sometimes be brusque. But since I was familiar with the mortgage process by the time I worked with the second company, I didn’t mind the lower level of service. In fact, I liked that they were in a hurry, because my loan closed quickly.

Research Potential Lenders

You probably already have a checking account at a bank or credit union, so you could consider getting your mortgage from them and enjoying the confidence of working with someone you already know -- just don’t expect a special rate, according to Bankrate. If you’re considering a lender you haven’t worked with before, look them up on the Better Business Bureau and ask friends and family if they’ve had experiences with the company. The real estate site Zillow has reviews of mortgage lenders. Your real estate agent probably also has one or more recommendations, and possibly even an in-house lender which can make things very convenient. (But you won’t be obligated to use the in-house lender and should still shop around.)

Once you have a list of a few lenders that other people liked working with, call a loan officer at each and ask questions. If the rate and fees are comparable, go with the company you feel most comfortable with.

Consider Working With a Mortgage Broker

Once upon a time, using a mortgage broker to shop loan offers for you was commonplace. Nowadays, only one in 10 borrowers work with one.

Should you? That depends.

You could see now as a better time than ever to work with a broker, since post-financial-crisis regulations require brokers to pass licensing exams, and ban them from profiting off of getting borrowers to pay higher interest rates -- a practice that damaged brokers’ reputations in the eyes of many. Then again, nowadays you also have access to mortgage rate and fee data online, so it’s not too hard to do what brokers do for yourself.

But working with a broker can save you time if you don’t want to shop around. Brokers can be especially helpful to borrowers who have trouble getting a loan, like those with less-than-perfect credit. And working with a broker doesn’t necessarily cost more than borrowing directly from a lender, according to the web site The Truth About Mortgage.

Just like with researching a lender, research a broker you’re considering working with, talk to more than one, and compare the costs. Personally, I interviewed a broker recommended by my real estate agent once, but I found a better rate than the ones he quoted on my own, so I told him thanks, but no thanks. But I wouldn’t rule out consulting a broker in the future if I needed help.

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