What to do before choosing a mortgage lender
If you are in the market for a house you probably want certain things. Maybe you want a welcoming front door or a large backyard. At the end of the day you need money to get that pretty home. That’s why you need a mortgage lender. The right lender can save you lots of time stress and plenty of money. And get the right loan officer – the professional who represents the lending institution – can be a powerful ally when you close on the home. Because this is a large decision you want to choose your lender and loan officer wisely.
The three different types of lenders
There are three types of mortgage lenders – banks, credit unions, and mortgage banks. Also there are mortgage brokers. Before we can choose the right one we need to know what you’re looking for, and where to find it. Here are some options.
Banks
These are like chase bank, for bank of america and include your local banks. These banks do their own underwriting which means that they investigate your finances and credit history, these banks especially smaller ones, can offer lower fees and less strict credit requirements sometimes. If you like to have all of your bank accounts in one place, you may want to use your own bank or credit union to get the mortgage. You will be assigned a loan officer at your bank who will receive a commission or bonus for writing your loan.
Credit unions
These are nonprofit and customer-owned so they are not represented by shareholders like a bank. Because of their nonprofit status they usually offer personal services and lower fees. Sometimes though there’s less convenience they have fewer branches and atms. To apply for the loan you must be a member of the credit unions community which could be for instance schools and government affiliated or union affiliated. You will be assigned a loan officer who will receive a commission or bonus for riding alone just like the bank.
Mortgage banks
These banks such as aim loan and pennymac only offer home loans mini realtor online lenders like rocket mortgage by quicken loans operate as mortgage banks. You will be assigned a loan officer who received a commission or bonus from the lenders fees from writing your loan. Online lenders offer less hand-holding.
Mortgage broker
These are essentially personal home loan shoppers they are the liaison between the home buyer and the mortgage lenders and they help you find the lowest rates. By doing the heavy lifting for the borrower they make loan shopping more convenient and sometimes faster. Mortgage brokers sometimes are individual agents or groups of agents who act as independent contractors. For their services mortgage brokers typically will charge 1% to 2% fees on your loan which is paid by the borrower or sometimes the lender at closing.
Be sure to shop around before you decide!
Before you choose your lender you need to do four things
1. Research any bank credit union mortgage bank for mortgage broker that you’re considering sometimes there are jd power surveys that you can look at.
2. Interview lenders. You want to have a short list of three lenders if you’re thinking about selecting an online lender see our article on that.
3. Seek advice. Ask your friends and family about where they got their loans be sure to ask your brother-in-law who is a money nerd about his loan.
4. Ask your pretty home realtor for a second opinion they have worked with lenders for years particularly here in Michigan and will help you find the best one.
Now, To make sure that you get the best shot at getting the pretty home you want is by getting pre-approved for your mortgage loan. Mortgage pre-approval is a promise from the lender that you’re qualified to borrow up to a certain amount of money at specific interest rates which is based on appraisals and other requirements. Basically, you will be getting a home based on how well your credit is. To get pre-approved the lender will look very closely at your credit and we’ll make sure that your income is verified. Once that happens you will receive a pre-approval letter stating that your loan will be approved once you make an offer on a pretty home and submit documents back to your lender. You’re pretty home realtor will walk you through every step of the way.
