For all the hassles that come with it, there is nothing like owning your own home. Tenants tire of owning nothing. Life itself means changes in family size, health, the neighbourhood, or financial circumstances. Motivations are aplenty for seeking a new home, and for nearly everyone that will mean seeking a mortgage to provide most of the purchase money. How does a home buyer select the right mortgage lender? Here are five steps to ease your mind and understand the process.
Be prepared.
Be acquainted with mortgage industry jargon and procedures. Astute buyers will check their credit reports, correct any errors, and remedy obvious problems. This is the time to reduce debts, as existing debts impact the maximum mortgage amount. Scrape together a down payment using personal assets, family gifts, and government programs. Estimate the projected price range of the new home. Finally, come to a firm conclusion, or a clear meeting of the minds with that significant other, as to goals and dreams. If he wants a four-family apartment building and she wants a white picket fence in the country, there will be fireworks. You can get help here.
Identify the Lender Type, Then Pre-select
Research the different lenders. Know the advantages and disadvantages of mortgage brokers, credit unions, online-only lenders, traditional banks, mutual savings banks, and savings and loans. Which best suits your personality and circumstances? Seek the advice of friends and colleagues, particularly those recently active in the market. Identify the cream by recommendations and reviews and your own criteria. Do reviews indicate prompt response times? Do their transactions close on time? Do any recurring complaints or issues arise?
Interview Lenders Informally
Contact the lender candidates by a variety of means (email, telephone, chat), particularly if they are out of town. This will give you a sense of their responsiveness, knowledge, and customer focus.
Comparison of Prices and Fees
Once you have selected your dream prospects, seek apples-to-apples comparisons of APR, points, down payment, PMI, interest rate lock period, and all other fees and charges assessed by the lender. Study the fine print as to definitions, exceptions, and qualifications. Confirm with each lender that there are no additional fees beyond those in the pre-approval.
Consider More Than Just the Prices
It is wise to consider loan servicing in making a final decision as to your lender. Servicing refers to the post-closing function of accepting your payments, properly crediting them to the account, and perhaps making other payments for private mortgage insurance, hazard insurance, or real estate and school taxes. It is common for mortgage loans to be packaged and sold after the transaction, meaning that the lender you selected and worked successfully with no longer owns the loan. Another party will be performing the loan servicing function.
In the initial research, the home buyer might inquire whether the particular loan in question will be retained and serviced by the local institution. Some homeowners prefer the loan be retained, and the servicing done, by local professionals who are physically accessible if there is a problem.
The purchase of a home is a serious investment warranting a serious investment of research time. Following these tips should smooth the process of financing your next home.
