Wondering how to pick a lender for a mortgage? Finding your dream home begins with finding the right financial institution to help you secure a mortgage. Factors such as interest rates, fees, and the length of time it takes to qualify for pre-approval all come into play when shopping for a mortgage.
In this post, The Aitken Home Team will cover five tips for finding a lender that meets all your needs.
5 Tips On How To Pick a Lender For a Mortgage
1. Know your financial situation
There is no one-size-fits-all approach with mortgage products, as every home buyer’s budget is different. For this reason, you need to know exactly where you stand financially, what you can afford, and what will cause you to get in over your head.
If you’re in need of a larger loan, you should find a lender who specializes in jumbo loans, or loans that exceeds FHFA loan limits.
But if you are an average, middle-class home buyer and don’t plan to live in a high-rent zip code area like Los Angeles, Manhattan, or Nantucket, your situation will be different. In this case, visit a lender who is known to offer competitive rates and who is quick with preapprovals.
If you don’t already have a good handle on your financial situation, an experienced lender will tell you exactly what you can comfortably afford so you don’t stretch your budget beyond normal limits.
Related: “Spring Mortgage Rates on the Rise”
2. Know what you can qualify for
Conventional homes loans are most common among home buyers, as they tend to offer lower interest rates. In order to obtain this type of loan, you must meet certain criteria.
For example, you must be able to afford a five to 20% down payment. You’ll also need a credit score of 620 or higher, and a debt-to-income ratio no higher than 43%.
3. Know your options
If you don’t qualify for a conventional loan, there are other options for obtaining a home loan. Research your options and see if you qualify for loans through the Federal Housing Administration, Department of Veterans Affairs, or even the United States Department of Agriculture.
In most cases, these loans come with lower credit score qualifications and down payment requirements.
4. Know whether you prefer online or face-to-face service
Online mortgages are becoming quite popular, especially with millennial home shoppers. But they’re not suited to everyone. The most obvious drawback is that they don’t offer face-to-face customer service. They also aren’t necessarily acquainted with the market you’re looking to purchase in.
With online mortgages, it’s crucial to understand your needs and exactly what you’re looking for in a lender.
Related: “Is Your Pre-Approval Still Good?”
5. Know your style of lender
Think about whether you’d prefer a smaller lender, such as a local credit union, or if you’re more comfortable with a larger corporate entity, like Wells Fargo.
Personal service might be more personal with a smaller lender, while a larger company might make you feel like a number rather than a client. But if you want to move quickly, a larger company might more beneficial because they often retain in-house underwriters, attorneys, and processors who can work through your application quickly.
At the end of the day, research is key. Make a list of your preferences and weigh the pros and cons of utilizing the services of a smaller company versus a larger, nationally-known lender.