Buying a home is one of the most significant financial decisions you will make in your lifetime. Most people will need a mortgage to afford a home in the United States, where the average price is over $300,000.
But with so many mortgage lenders, how do you know which is the right fit for you? This blog discusses essential factors to consider when selecting a mortgage lender.
Mortgage Advice and Guidance
One of the most important things to look for in a mortgage lender is their level of expertise and the quality of their advice. Buying a house is complicated, but a suitable mortgage lender can help you and give thoughtful guidance.
Find a lender who knows the market and can help with mortgage rates, loan choices, and home buying. They should answer your questions and help you improve your credit score or financial situation for a better mortgage rate.
Competitive Mortgage Rates
Of course, one of the most important factors to consider when choosing a mortgage lender is the interest rate they offer. Comparing rates from different lenders is essential. A lower interest rate can save you thousands of dollars over the life of your loan.
Remember that mortgage rates can vary based on your credit score, down payment amount, and the type of loan you seek. Getting quotes from multiple lenders is essential to get the best rate possible.
Loan Options
Lenders offer various loans, so think about the loan you want and if the lender provides it. Some common types of loans include:
- Conventional loans: Conventional loans do not have government backing and are available through and financed by a private sector lender.
- FHA loans: A Federal Housing Administration (FHA) loan is a mortgage the federal government insures. The FHA is a government agency that regulates and ensures FHA loans but does not lend the money directly.
- VA loans: VA loans are guaranteed by the Department of Veterans Affairs and are for veterans and active-duty military members.
- Non-QM loans: Non-QM or non-conforming loans are mortgage loans that don't meet the Consumer Financial Protection Bureau's (CFPB) requirements for qualified mortgages. Non-QM loans are for those who can't get a regular mortgage because of their financial situation. Examples of non-QM loans include bank statement loans, 1099 loans, DSCR loans, and asset depletion loans.
Make sure to research the different types of loans and determine which one best fits your financial situation. Then, look for a lender who offers that type of loan.
Customer Service and Communication
Buying a house is stressful. Choose a mortgage lender who gives good customer service and communication. Look for a lender who is responsive, transparent, and willing to answer any questions you have.
You can understand a lender’s customer service by reading reviews and asking for recommendations from friends or family who have recently gone through the home-buying process.
Closing Costs and Fees
Besides the interest rate, think about the costs and fees for closing a mortgage. These can include origination fees, appraisal fees, and title insurance fees.
Some lenders may offer lower interest rates but have higher closing costs, while others may have higher interest rates but lower closing costs. Compare loan costs, including interest rate and closing costs, to find the best deal from lenders.
Online Tools and Resources
Nowadays, mortgage lenders provide online tools and resources to assist you in buying a home. These can include mortgage calculators, budgeting tools, and educational resources.
Look for a lender who offers these tools to help you make informed decisions and stay organized throughout the home-buying process.
Reputation and Experience
When choosing a mortgage lender, it’s essential to consider their reputation and experience in the industry. Find a lender who has helped many people get mortgages and has good reviews from previous customers.
You can check the lender's experience and qualifications to make sure they are knowledgeable in mortgages.
What to Avoid When Choosing a Mortgage Lender
While there are many factors to consider when choosing a mortgage lender, there are also some red flags to watch out for. Here are a few things to avoid when selecting a lender:
High-pressure sales tactics
If a lender is rushing you or trying to sell you more services, it's better to avoid them. A suitable lender will provide you with all the information you need and give you time to make an informed decision.
Lack of transparency
If a lender doesn't clearly explain their fees, rates, or loan choices, it suggests they may not prioritize your best interests. Ask for a breakdown of all costs and fees associated with the loan before deciding.
Poor communication
It can be a significant red flag if a lender is unresponsive or difficult to contact. When buying a home, pick a lender who is easy to reach and ready to answer your questions. This will ensure good communication throughout the process.
Conclusion
Choosing the right mortgage lender is a crucial step in the home-buying process. Consider mortgage advice, rates, loan options, service, and reputation to choose the best mortgage for your finances.
Remember to shop around and compare rates from multiple lenders to ensure you get the best deal possible. With the right lender by your side, you can make your dream of homeownership a reality.
If you have questions about the home buying process and would like to speak to one of NASB’s mortgage loan experts, call us at 855-374-5993.
