New Year New Home – How to Pick The Right Mortgage Lender
Finding the right mortgage lender involves more than just getting the lowest initial interest rate. Along with a number of upfront costs which vary from lender to lender, there are several other factors to consider when choosing a mortgage company. Here are several important questions to ask when selecting a mortgage lender.
What is My Credit Score?
Lenders factor in your credit score when making an offer. Some lenders may consider a score of six-hundred-and fifty as risky, while others will find it just fine. By knowing your score in advance, you will be able to get an idea of what type of offers you should receive. Equifax, Experian, and TransUnion are each required to provide you with a copy of your credit report, on request, once every 12 months.
Who Offers the Best Rate?
All things being equal, the cost of your new mortgage will probably determine the lender you ultimately choose. Lowering your mortgage rate by just a quarter of a point can translate into thousands of dollars of savings over the life of a loan. Don’t assume that all lenders basically offer the same rates, they don’t. Banks and mortgage companies compete fiercely for your business. Start shopping online but, remember the quote you see online is a starting point. A lender must first pull your credit information and processes the loan application to provide an exact rate. Also, principal and interest payments aren’t the only mortgage-related costs. Points, closing costs, and loan origination fees typically fall on the borrower, as well. These additional costs will be reflected in the loan’s APR. So use that, over the loans interest rate, as a guide when determining the true cost of the mortgage.
Do They Require Private Mortgage Insurance?
Private Mortgage Insurance (PMI) insures the lender for the amount of the loan if you default. PMI typically adds between 0.5 and 1 percent to the loans APR and can add up to thousands of dollars over time. Most lenders do not require PMI on loans where the down payment is twenty percent or more. The good news is, if the lender does initially require PMI, you can request to have it dropped once your equity in the home exceeds twenty percent or more. Ask potential lenders if they will drop the PMI if your property sees a substantial increase in value, as well as paying down the loan.
What types of “Lock-In” Period do They Offer?
Being locked into a rate can be a double-edged sword. If rates go up, you’ll get the benefit of the lower rate. Of course, if rates go down, you’ll want the better deal. Typically, rates get locked in at the time of approval and remain so until the closing. Some lenders offer the option for a one-time “float down”. Keep in mind, however, that changes to your income or employment, your credit score, or the property appraisal value can void the original rate. A revision to the loan itself, such as length or type of loan, may also result in an updated offer. Also, consider how long you’ll be locked in, as things don’t always go as planned.
Consider an “In-House” Lender
If you’re buying in a planned community, consider using their “in-house” lender, if they have one. Some builders and planned communities develop a relationship with a mortgage lender to facilitate the financing process for their customers. Due to the sometimes stressful and complicated home buying process, buyers also appreciate the simplicity and convenience of “one-stop shopping.” Lenders who work with a community or builder on a regular basis know all of the “ins and outs” of the neighborhood and may often be able to streamline the entire transaction, as well. Many communities have a loan officer or mortgage broker located right in the sales office.
Moving comes with plenty of reasons to feel stressed but, with a little “due diligence,” finding the right mortgage lender doesn’t need to be one of them.
At Viera Builders we have built relationships with several lenders, if you would like to work with vetted lending companies consider the following:
Finance of America
FBC Home Loans
The Mortgage Firm