So you want to buy a home and you need the funds for it. Some people have the funds for their new home upfront but others will need more financial assistance. This is where a mortgage broker can be of service.
You’ll find no shortage of mortgage brokers, online lenders and banks that are eager to take your loan application but not everyone is the right one for you. A certain mortgage broker can guarantee you good deals but how sure are you that they’re perfect for your situation?
Before you sign up with a lender, do your research. A little homework can help you narrow down your choices.
First Things First: There are Different Types of Lenders
Start by determining the type of lender you need. You can read more on print sources like The New York Post or online sources.
The different types include the following:
• Direct lenders. These lenders are credit unions, banks and other organizations that directly provide mortgages to consumers. Since direct lenders offer their own loans, most of the mortgage processes happen in-house, so you can easily ask your lender questions about terms, fees and more.
• Mortgage brokers. These lenders are licensed and independent professionals who serve as matchmakers between borrowers and lenders. Brokers are often paid by the lender or the borrower. They often charge a small percent of the loan amount for their services.
• Wholesale lenders. Unlike direct lenders, these lenders don’t interact with borrowers. They partner with mortgage brokers to offer loan products at more affordable prices.
• Correspondent lenders. These lenders create and fund their loans but sell them to larger lending institutions.
If you’ve settled on a lender and decided on hiring one, here’s what you need to do.
How to Find The Best Mortgage Lender
Finding the best mortgage lender requires some shopping around and doing your research. List down potential lenders and ask them about their loan terms, rates, property insurance, down payment requirements and other fees. Compare the details.
Here are some steps to keep in mind:
Strengthen Your Credit
Before you apply for mortgages, check your finances and fix them if necessary. This means pulling your credit reports and credit score.
Once every year, three main reporting bureaus provide you with a free credit report. These bureaus are TransUnion, Experian and Equifax. Visit www.annualcreditreport.com to learn more. If your credit score is lower than expected, browse through your current reports for delinquent accounts, errors, high balances and late payments.
Improve your score by addressing all of your credit card issues. Pay down each of your credit cards and make payments on time.
A solid credit score gains you the trust of lenders. They will be confident in your ability to pay debts on time, as well as feel more comfortable in doing business with you. Lenders will also want to see how you can handle your current debt (if there is any) with a new mortgage payment.
Determine Your Budget
Another important step in finding the right mortgage and lender for you is knowing how much you can afford for the house. Lenders often qualify applicants for a loan that maxes out their budgets and still leaves legroom for emergency expenses. But if they deem that your budget isn’t enough, they may consider your loan application a bad financial move.
Most lenders pre-approve applicants based on their outstanding loans, gross income and revolving debt. To get a more accurate estimate of how much you can afford, factor in your utilities and other financial goals to determine how much you should spend on your mortgage payment.
Why does this matter? A closer inspection of your budget gives you a better idea of how much you can afford for mortgage payments. Apart from giving you peace of mind, this can also help you determine which lender provides the best terms for your budget.
Compare Terms and Rates
Settling on the first mortgage lender you find isn’t always the best idea. If you want to find the best deals, you have to rate and shop around. You should also try to look for a lender that communicates in the method you prefer, whether it’s in person, online or via text.
If you don’t shop around, you may end up leaving more money on the table. Instead of losing more money, spare the time to shop around for lenders and rates.
Doing your homework on mortgage options can set you up for a successful loan application. Keep in mind that mortgages are not one-size-fits-all solutions; there are different mortgages for different homeowners. So save more by finding the right lender for you.