What Is A Lender?
A home is obviously a very expensive purchase, probably the most expensive thing you’ll buy your entire life. That being said, unless you’re paying cash up front, you’ll probably need a mortgage lender to help you buy a home.
Put simply, a mortgage lender fronts you the money to buy a house, provided that you pay them back with additional interest and fees over many years to come. It’s easy to see why it’s important to find a lender that’s the perfect fit for your situation when you consider how much money is involved and how long they’ll probably be a part of your life.
As you start the search for the perfect mortgage lender, it’s important to remember one thing…a lender is a salesperson. Obviously the way that they make money is by signing you up to take a loan from them. That being said, it’s important to determine which ones really have your best interests in mind and which ones might be trying to make a quick buck.
What Should You Look For In A Lender?
1. Start With First Impressions
When it comes to lenders, going with your gut is rarely a bad thing. Once you’ve found a quote you like, the next step should be to meet up with the lender to get a better idea of what they’re offering, either in person or on the phone.
At this point, you need to be very aware of how they’re treating you. Are they taking the time to educate you about different options? Do the quotes you saw originally match the actual offers they’re showing you now? Are they making you well aware of the full timeline of their loan process?
Things like this should be considered when determining whether or not you’re finding the best option for your specific situation.
2. Don’t Be Scared To Check References
Whether it’s through word-of-mouth, online reviews, or even asking for past client testimonies, it’s always good to do a little research before entering into business with anyone when there’s so much money on the line. See what past clients have to say about their experience with a given lender. It might help you spot certain problems before you’re locked into a deal.
3. Look For Real Expertise
You’ll run into plenty of people when you’re in the market for a loan, whether it’s “loan officers” “consultants,” “planners,” and “senior advisors.” It’s important to not get hung up on what position a certain lender holds, a lot of the time these titles can be political. However, if you see someone that’s got a few letters at the end of their name, that’s a good place to start. If someone has an MBA, it means they’ve pursued a graduate education…in other words, they might be a safer bet.
The CPA title is worth mentioning as well, representing a field related license that is very prestigious. While other buzzwords might be used to make a lender sound more dignified, real credentials are what you should look for, be it academic achievement or positions earned with experience over time.
4.Don’t Just Pick The Lowest Rate
t’s easy to go with the cheap route or at least with what seems like the cheap route at the time. However, cheapest isn’t always the best.
If you’re unfamiliar with the home buying process, it’s important to find a lender that will help you out along the way. The process of mortgage lending should be a joint effort between the lender and the buyer, with the lender offering financial and credit advice prior to giving you money.
Don’t be afraid to shop around, interviewing a few potential options before picking the perfect fit. The last thing you want is to sign into a low rate, only to be hit with tons of expensive lender fees while you’re trying to pay off your loan.
5. Can They Keep It Simple?
The financial industry is filled with terms the layman won’t understand. Don’t let your lender intimidate you with complicated business talk. They should be willing to take the time to make sure you understand every step of the process.
If things seem a bit complicated, it’s always best to come back to two specific pieces of data, the interest rate of the loan and the various lender fees throughout the payment period. Start with a goal for how many years you want to spend paying off your loan and then consider the fees and annual percentage rate associated with that specific loan for an actual final cost.
6. Do You Want A Small Or Large Lender?
There are plenty of pros and cons for both large-scale and small-scale lenders, it’s up to you to determine which factors you care about most. Small lenders are more likely to give you more personal service and face-to-face contact, yet may lack in options, efficiency, and special features (like online payments) when compared to one of the larger companies.
Common Pitfalls
1. Deals Too Good To Be True
In the age of the internet, advertising has taken over. The mortgage loan industry is no exception. Once you start inquiring about finding a lender online, there’s a good chance you’ll start seeing more advertisements in the sidebars of websites offering insanely low rates and quick closing times.
Sometimes, it’s possible to find a great deal online, but a lot of the times, if something sounds too awesome to be true, it’s probably not as good of a deal as you think it is.
2. Not Doing Your Own Prep
You need to make sure your own financial portfolio is up-to-date before seeking a loan. Get a credit report. Know exactly where your debt stands. Add up all of your assets.
Being prepared with the correct numbers will help you find the best possible deal and save you time. This shows lenders that you’re involved and proactive. They’ll probably show you more respect as a result.
3. Not Exploring All The Options
Just because a lender tells you one deal, doesn’t mean there’s not a better one on the table. If you can afford to pay off a loan off quicker than what they’re proposing, ask for a shorter loan period with a lower interest rate.
4. Forgetting The “Good Faith Estimate”
This is basically a preview of all costs you’ll face while paying off your loan. If you forget this, you might be in for a surprise down the road. This also makes it easy to compare different lenders to each other.
5. Skipping The Negotiations
Just because the “Good Faith Estimate” puts a specific number on the cost of the entire transaction doesn’t mean that this number is set in stone. If you ask, certain fees can often be lowered or waived, saving you some real dough down the road.
The Bottom Line
With so much time and money on the line, it’s important to find the mortgage lender that will give you the best deal for your specific situation. Don’t be afraid to shop around, there are plenty of fish in the sea.
If you feel uneasy about certain aspects of a deal, try to find a better option. It’s easy to be fooled by flashy language and “special offers,” but always remember that whatever lender you end up picking will probably affect you for several decades to come.
There are plenty of great lenders out there, but it’s up to you to find one.
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