7 Ways to Vet Your Mortgage Lender

Buying a home is one of the biggest purchases most consumers ever make. And yet many of us put little to no thought into getting a mortgage loan or the lender we'll work with during the process.

This attitude can cost you. In 2015, the Consumer Financial Protection Bureau found that 47 percent of mortgage borrowers didn't shop around for lenders. The CFPB also found that those applying for a 30-year, fixed-rate mortgage could qualify for interest rates that varied by more than half a percent. This may not sound like much, but the CFPB noted that the difference between 4 percent and 4.5 percent could result in savings of $60 per month, or $720 per year.

So how do you make sure that the mortgage lender you choose will offer you the best deal and the best service? You need to vet these financing professionals.

1. Ask your real estate agent, but also shop around

Real estate agents work with plenty of lenders and should be able to recommend a mortgage loan officer. Because they want their clients to refer them to other buyers and sellers, they tend to recommend loan officers and lenders who provide good service and prices.

But don't automatically take your real estate agent's recommendation. Talk to friends and family members who recently took out mortgage loans. Did their lender do a good job for them? Do they wish they'd worked with a different one?

Search mortgage comparison sites such as LendingTree, too. LendingTree lets you put in your basic financial information and receive preliminary offers from lenders seeking your business. Just be aware that there is no guarantee that these preliminary offers will match the final offers lenders make should you formally apply.

Once you have a list of lenders and loan officers, contact them. It's now that you can ask them questions to help determine if they are worth working with.

2. Do some rate and fee comparisons

When interviewing lenders, ask them how much their borrowers typically pay in closing costs. These are the fees that lenders and other third-party providers, such as real estate attorneys and title insurance companies, charge to originate your mortgage loan. These fees can quickly add up, often totaling 3 percent or more of your loan amount. Ask the lenders you are interviewing, too, what interest rate someone with your finances can expect to be charged.

Be careful, though: Some lenders might quote you a lower interest rate, but charge you a higher closing fee at the same time. Make sure to consider both the rate and fees. (See also: Here's What's Included in a Home's Closing Costs)

3. Ask about closing times

Originating a mortgage loan takes time. You can expect to wait 30 days or more between the moment you apply for a loan and the day you sign the papers. But some lenders are faster than others. Ask your lender how long it takes borrowers on average to get to the closing table. If most lenders say 30 days, but one says 60? You might want to skip working with the outlier. (See also: How Long Does It Really Take to Close on a House?)

4. Ask your lender to explain the entire lending process

Most of us aren't familiar with how the mortgage-lending system works, so it's important to work with lenders who can explain this often-complicated process clearly. If the lenders you are interviewing can't or won't do this, find a new one to vet. (See also: 5 Homebuying Questions You're Embarrassed to Ask)

5. Ask to speak to past clients

Ask your lender to provide you the names and contact information of at least three past clients. When you get a hold of these referrals, pick their brains. Ask if the lender responded quickly to phone calls, if the closing costs they charged were higher than expected, and if they fixed any problems that popped up during the lending process. If lenders balk at providing referrals, don't work with them.

6. Do your online research

Once you've found a lender you like, do some online research. Check out sites such as Yelp or Zillow to find online reviews of the lenders you are considering. If a lender has an overwhelming number of negative reviews, you might want to steer clear.

7. Get preapproved

During the preapproval process, a lender will run your credit and verify your income. You help the process along by sending copies of financial documents such as your recent paycheck stubs, bank account statements, and income tax returns. Your lender will use this information to determine how much loan money they are comfortable giving you, and will send you a letter stating the results.

The best thing about preapprovals is that they are free. If you find three lenders you like, get preapproved with all three. You aren't obligated to work with any lender that preapproves you. But you might discover that one lender approves you for $200,000 while two others approve you for loans as high as $250,000. This could influence which lender you finally choose.

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