For most homebuyers, first-timers, in particular, the mortgage process is the most intimidating. But it doesn't need to be. What you need to do before you start the process is to know the basics of mortgages.
Then it is time to find the right lender for you. Choosing the best mortgage lender is essential because they will be the ones to guide you through the entire process - from offer to closing.
You will not have problems getting a mortgage if you are aware of the basics of mortgages and if you choose the right mortgage lender. With that, you need to know how to pick the best mortgage lender for you. Here' a few tips that will help you with your selection.
1. Check your credit score and make the necessary damage control
There are several qualifications that home buyers need to meet before they can buy a home. It includes certain income and credit criteria as an assurance that they can repay their loan from the mortgage companies.
If you have a low credit score, it indicates that lending is risky for you. You will have a higher interest rate on your home loan. Make the necessary damage control to get your credit score in good shape. Once you have a higher credit score and pay your bills on time, you will have more negotiating power with potential lenders for better rates. In general, having a credit score of less than 580 will give you a hard time qualifying for mortgages.
2. Understand the major players in the lending landscape
It's important to understand the major players because it will help you navigate the crowded lending field. There are different types of home lenders. They are the credit unions, correspondent lenders, mortgage bankers, mutual savings banks, and savings and loans.
Use the Nationwide Multistate Licensing System Registry to check if the lender you're considering is registered in the state where you are planning to buy a home.
3. Know the different types of mortgages
Not all mortgage products offer the same services, though. It's also best that you know the different types of mortgages because any of them could be the best one for you. Here are the main types of mortgages:
Conventional mortgages
Conforming mortgage loans
Non- conforming mortgage loans
Government-insured FHA loans
Government-insured VA loans
Government-insured USDA loan
Fixed-rate mortgages
Adjustable-rate mortgages
4. Shop around and compare rates from various mortgage lenders
You can utilize the internet to search for the best mortgage rates. Take note that the quote you often see online is just an estimate. A broker or a lender will need your credit information and process a loan application before they can provide an accurate rate. If you're already satisfied with the product, all you need to do is lock it in.
With several quotes in hand, you can now start comparing the costs. Determine which quote works best for you. You can also utilize your research as leverage when negotiating for mortgage rates.
5. Ask questions
Asking for a lender referral from family, friends, or your real estate agent will help you narrow down your options. It will also help if you read online reviews. If you already have names in hand, ask the right questions. Here are some of the things you can ask your potential lender:
Their preferred means of communication with their clients
If they respond to messages immediately
Their turnaround time on pre-approval, appraisal, and closing
Different lender fees you need to pay for the closing
The list of down payment requirements
When choosing the right mortgage lender for you, make sure you consider all the factors. For instance, if you have narrowed down your search to two lenders, it may be worth choosing the one with excellent reviews, answers your email within a house, and always closes on time even if they offer a slightly higher annual percentage rate.
