Although the pandemic has produced a multitude of negative effects on personal and economic finances, the housing market is an industry that has brought several benefits to families in the past year. When the Federal Reserve cut rates over a year ago, it subsequently had a domino effect on mortgage rates and refinancing rates, which caused them to drop below 3%.
According to Fannie Mae Fourth Quarter Mortgage Survey, consumer demand for mortgages and new mortgages has grown from 55% in 2019 to almost 70% in 2020. While there is still time to get a mortgage or refinance, it is also important to choose the lender that suits your needs, just like you would for a car loan, a personal loan or for a student loan.
Choosing the wrong lender or the wrong type of mortgage can easily cost you hundreds of dollars a month, so consider these key factors when looking for the right mortgage lenders for your home loan:
- Loan officer vs broker
You can start by using Credible’s online tools to find the best mortgage rates and pre-qualify for a home loan in minutes. Let’s break down some tips for finding the right mortgage lender for you during the home buying process, whether you’re looking for a USDA loan, a compliant loan, or the like.
The overall cost of a mortgage loan is an important indicative factor to consider when choosing a lender and loan products. While you can control how much money you put in, other costs like interest, taxes, and insurance will all factor into the price of your mortgage.
For example, if your down payment is less than 20%, you will likely need to purchase private mortgage insurance, which protects the lender if you cannot make your mortgage payments for any reason.
“A lot of lenders have origination fees that are about 1% of the loan amount,” says Loren Howard, founder of Prime Plus Mortgages. “Not to mention, there are also closing or title costs that can affect your principal balance and overall mortgage costs.”
Howard also mentioned how many of these costs are built into your total loan amount or need to be prepaid at closing. Hence, it is better to get the exact figures from the lenders regarding their fees and to research the best deal. Credible can introduce you to several mortgage lenders and provide you with personalized rates in minutes.
Thanks to modern technology, getting a mortgage does not have to be such a tedious process anymore. While there can still be a lot of paperwork to complete, most lenders now allow you to do it online and submit documents easily through an online lender portal.
However, there is still a technology gap between mortgage lenders. Some companies have streamlined the process of collecting documents and granting loans, while others still use paper documents and deal with a slower manual process.
Check with lenders ahead of time to see how they accept documents and process loan application details as you narrow down your best choices.
It is important to understand that the lender you choose may not be servicing your mortgage after closing. A mortgage manager is the entity that holds your mortgage and is who you make the payments to.
Chris Birk, Director of Education for United Home Loans for Veterans Said: “Upkeep is basically anything about how long your mortgage will last after you close, which includes collecting monthly payments, checking the regularity of escrow deposits for property taxes and insurance. housing and loss mitigation issues management.
Birk added that some lenders might sell your loan right after closing, while others might hold your loan for years and then resell later.
While what happens with your service doesn’t affect your interest rate or the terms of your loan, you might want to ask your lender if they provide in-house mortgage service if that’s important to you. During the mortgage loan process, you might establish a relationship with loan officers. If you really like your lender and have chosen them specifically, it makes sense to keep your mortgage with them if possible.
Loan officer vs broker
There are so many different words and titles used during the mortgage process. One thing that can be a little confusing is dealing with a loan officer versus a mortgage broker. The two are not the same. A loan officer usually only offers mortgage options with the financial institution they work for. A mortgage broker acts as a matchmaker between you and a number of different mortgage lenders.
Mortgage brokers may charge additional fees as they help you shop around. With a loan officer, you pay no fees since you’ve probably decided to get a mortgage from their financial institution (or bank).
Credible does not charge any fees to help you shop and find the best mortgage lender. It is important to compare rates and terms before choosing a single lender. Even if you’ve heard good things about a particular lender, it’s often best to compare all of your options before making a decision.
The bottom line
Choosing a lender is a process – besides looking at different types of loans – but it doesn’t have to be difficult. Be clear on what you are looking for and what is important to you. Please understand that there may be additional fees, fine print, and other factors that may impact your experience.
Also, be sure to visit Credible to pre-qualify for a mortgage and find the best lender for you. In just three minutes, Credible can help you find the best lenders and mortgage rates to choose from without pulling your credit report.
Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.