Did you know that last year, over $182 billion was loaned for mortgages? Lending is at a record high, and it is easier than ever to get approved for a mortgage. But do you know how to find the one that is best for you?
If not, then we can assist. Read on as we discuss seven essential factors when choosing mortgage lenders.
1. Their Rates
Inevitably, the first thing that will attract you to a mortgage lender is their rates. When comparing mortgage fees, the basic rate gives you a rough idea of who may be giving the best deals. You will also need to take fees and products into account, so use this simply as a guide.
There are two types of rates available. These are fixed and variable rates.
A fixed-rate remains the same for a given time period. When making initial comparisons, this should be the value you look at to see the basic options provided by lenders.
Bear in mind that when a fixed-rate period is up, it will revert to a rate set by the lender. Check what this is before entering a fixed-rate loan.
Variable rates fluctuate depending on the level set by the Federal Reserve. If interest is high, you may pay more. Lower and you will pay less.
2. What Type of Lender Are They?
The most common option when choosing a loan is a bank. You have the option of choosing between large, national institutions or local banks. Each has its own strengths and weaknesses.
Larger banks are often able to offer more competitive rates. However, as they have lots of clients you may find they take a lot longer to process your loan. Their terms for acceptance may also be stricter and more rigid.
A local bank will generally give a more personal service, and put the loan through for you much quicker. However, they may have fewer options and services.
Another option for lenders is a credit union. The plus point is that they generally offer very low rates. You will need a great credit score to access them and often need to be part of the union itself.
Finally, you can choose online lenders. They offer low rates and often have some other excellent deals. However, they have no physical premises so all customer service is online, which may be a problem.
3. Do They Have Terms to Suit You?
Terms generally start with the amount of down payment you have. This is often 20%. If you don’t have this, many may ask that you pay for private mortgage insurance to protect their loan.
After this, you need to think of the length of the loan. Paying over a shorter time will mean less interest but higher payments. A longer time means lower monthly payments, but a higher level of interest.
4. What Fees Will You Pay?
Once you have rates, you need to look beyond them. Very often, a great interest rate loan can be accompanied by a range of fees. These may be used to claw back some of the loan payment so that once added up, the loan is not doing you any favors at all.
Firstly, you need to know who is paying the commission if you use a mortgage broker. This could be paid by you, the chosen lender, or a hybrid of both. There will also be a processing fee for your application.
When this is taking place, you will also be charged a fee for your credit report. This is so the bank can access your past credit history. If you find a home, you will then also have an appraisal fee added, so someone from the lending firm can come and value the property.
Finally, you can consider discount points. These cost, but reduce certain fees and get you better terms. They are not essential and should be carefully considered against your budget.
5. Check References and Reviews
Before signing anything, you need to know the lender’s credentials. Ask friends and family who they have dealt with. You can get the most genuine, honest feedback in this way.
After this, check online. If you are going for an online lender, particularly one you have not heard about before, then make sure you do thorough research.
6. Consider a Broker
If this seems a lot to add up, or you just don’t have time, then consider a broker. It is possible you may have to pay a fee, but the broker will already know a range of lenders and what they have on offer. They may even be able to negotiate better deals than you could get on your own.
In addition, they will know all the contract and legal terms, which you may be confused about if working on your own. However, just like the lender, you will need to do some research to find the best one.
7. How Quickly Can They Close?
Time is essential once you find a property you want. The last thing you need is to spend an age waiting to move in. A long wait may also mean you end up losing out on a property to someone who can get in before you.
Some lenders will allow you to get a pre-approval certificate. This means they have already qualified you for a loan. It is a guarantee to a potential seller that you are good for the money and can help you secure a deal.
Choosing Mortgage Lenders
Choosing mortgage lenders is not an easy task. In summary, you should look at fees and terms just as much as the rate. Shop around well in advance to get the best deal.
If you are looking for a Private Lender because you do not qualify for a conventional loan – either because your debt ratio is too high or you have rental properties you want to purchase or refinance… Click here to sign up and start your loan application immediately.