Finding Your Lender
The first thing your realtor will need to know when choosing properties to show you will be how much you’ve been prequalified for. Before you can begin shopping for a home in earnest, you should get prequalified for a mortgage.
So, how do you find the right mortgage lender, not just to prequalify you, but to support you throughout the purchase process, helping get you across the finish line with no unpleasant surprises?
- Understand your options. Mortgage brokers represent multiple loan sources and so can shop for the best loan solution for you across lenders and they charge origination and/or brokerage fees. A mortgage lender is a company that itself specializes in mortgage loans and is often, but not always, affiliated with a bank; the lender is the bank or is represented by the bank or mortgage broker. A loan officer represents the bank or lending company when working with a borrower.
- Solicit referrals. Aggregator sites provide information on products and rates, and rating companies like Forbes.com and USNews.com rank the best companies, but you won’t find much information about the quality of the experience or the integrity of your contact. It’s best to get referrals from people you know who have recently applied for a mortgage. If you don’t know anyone, leverage social networks to ask for referrals, then investigate them carefully.
- Ask Questions. Ask your sources if their rep explained things clearly, whether they got the rate they expected, if there were any unexpected fees, and whether they felt their agent was responsive and able to quickly address issues. When interviewing brokers, ask if they get paid in points or commission, and who their top lenders are; even ask how much they will make on your loan. When interviewing all lenders, ask for a Good Faith Estimate, an estimate of closing costs, and an explanation of rates and fees.
- Proceed with caution. The responses you get to your initial questions should tell you something about the provider – if they don’t answer with an air of transparency, that’s a red flag. Even if they happily comply, these are not binding documents; a disreputable provider will know how to manipulate the process right up until closing day. While there are ways to remediate a dishonest lending transaction, it’s better to choose a reputable partner and avoid the mess and hassle.
- Check for complaints. The National Mortgage Licensing System & Registry (NMLS) site www.nmlsconsumeraccess.org enables the public to access license and administrative information for state regulated mortgage providers in all 50 states, including whether your loan originator has been the subject of any state disciplinary proceedings. Bear in mind that not all lenders are state regulated; some are subject to federal oversight.
- Ask Your Realtor. Always count on your realtor for two things: qualified resources and sage advice. Your realtor can refer you to a vetted list of lenders; even with this referral, you should proceed with caution and ask questions to find the best match for you. Likewise, if something just doesn’t seem right at any time between finding a lender and your closing, ask your realtor for perspective. A response of “Oh, that’s normal” or “Hmm, that’s odd” will be valuable insight in figuring out your next steps. Your realtor may have ideas on how to address your concerns.
Before you even reach out to a lender, order your credit report and know your credit score. Some states, including New Jersey, have legislated that consumers have the right to receive a free credit report; federal laws also make it easy to get a free credit report every 12 months here https://www.annualcreditreport.com. While a high score is the ideal, lenders will work with all types of credit histories, and can suggest ways to improve your score even while you are shopping for your home; if your score needs work, you can take some time to try to improve it and save money for the long term, or move forward knowing that you may pay a higher interest rate and fees as a result.
Your mortgage may be the largest expense you will ever take on, and loan originators are in the business of making money. Do your research, understand your options, balance short-term expenses and long-term commitment when choosing your lender, and ask as many questions as necessary to understand the application process and be comfortable that your lender is acting openly and with integrity. A reputable lender knows how to do business without taking advantage of customers. That’s the kind of lender you want on your team.
Published April 6, 2018 in Buying