I found that the most important part of choosing a good lender is finding a company — whether it be a bank, credit union, or mortgage broker — that you trust and feel at ease working with. Buying a house is stressful enough without dealing with a lender that causes you added anxiety, or maybe worse, more money. The best way to find one is to start by doing your research.
Once you decide you’re ready to purchase a new home, begin asking family and friends for suggestions on home lenders they’ve used in the past and liked. Another good resource is the Department of Housing and Urban Development’s (HUD) website, which has plenty of information on home-buying including a link to the Federal Housing Administration (FHA), which provides mortgage insurance on loans made by FHA-approved lenders. You might also consider asking your real estate agent. (Just beware of any potential conflict of interests.) And don’t simply rely on these sources, you should always consult with your financial advisor before making any major financial decisions.
In your search for a lender, consider an organization that has a solid reputation — size doesn’t matter — that is flexible, responsive and open to negotiations. You should be able to negotiate your rate and lower the fees associated with your loan. You may encounter some resistance, but that is normal in negotiations. However, if you request a specific type of loan — say a 30-year fixed interest — and are pushed toward something else that does not fit your needs, consider it a red flag and move on.
Before you submit an application, interview a number of lenders and ask lots of questions. In particular, ask about their mortgage loan interest rates; what the lock-in policy is; whether there are any fees you should be aware of; and how long it typically takes them to approve and close a loan.
Once you’ve settled down with the right lender, make sure to request a good faith estimate. A good faith estimate provides the purchaser with a clearly defined schedule of all the fees and payments associated with the purchase of the property. It will give you a solid idea of where your money is going and to whom.
If you have any stories or dos and don’ts to share about your experiences with mortgage lenders or brokers (no names please), I’d love to hear about them.