Choosing the Right Lender

The importance of choosing a good mortgage lender is a point which cannot be overstated. Just as choosing the proper loan program is essential to your financial well-being, selecting a good lender can go a long way toward saving you thousands of dollars and untold hours of anxiety. And finding the right lender is not that complicated; you just have to do a little homework.

While many home buyers and homeowners continue to rely on traditional mortgage lenders (banks, credit unions, etc.), you do have a choice. Mortgage brokers differ from the traditional mortgage bankers in that brokers do not fund or even approve any type of financing. Whereas mortgage bankers will approve or disapprove your loan application and also fund the loan, the broker’s job is to match prospective borrowers and lenders together according to their needs.

Because not all lenders offer the same loan programs, a broker will usually have affiliations with several different lending entities. This generally makes it much easier to find a suitable loan that’s tailored to your individual needs through a mortgage broker, especially if you have less-than-perfect credit. Banks and credit unions typically do not make loans to credit-impaired applicants. However, borrowers still use them frequently because they’ve built a relationship of familiarity and trust there.

Online mortgage brokers are still another option that you might consider in your search. Online broker sites offer speed and convenience. You fill out one application or request for a quote, and usually several lenders will contact you with an offer. Another advantage of this system: your credit is pulled only once, if at all, during this process. (Several credit inquiries in a short period of time can damage your credit score.)

So, how do you choose? Some of the best resources for finding good lenders are family members, friends, or co-workers who have recently financed a home. Be sure to ask how they’ve been treated since the closing. What type of service have they received? Find online brokers of good reputation. A good track record is vital. Contact the brokers that are recommended. Research the broker sites and review their terms of service carefully. Of course, look for a lender that also has a program which meets your needs. Ask about the brokerage fees and who customarily pays them (remember, everything is negotiable).

Be sure to get pertinent information about the loan, such as interest rate and annual percentage rate (APR). How many points will you be required to pay? What are the closing costs? How long will it take to process the loan, and what’s the lock-in policy for the interest rate? Is there a prepayment penalty? Does the lender have a first-time buyers program? What is the lender’s track record on closing loans?

As always, the key is to gather as much information as you can, both about the lender and the programs that he or she has to offer. Once you’ve done your homework, you’ll be well able to choose a lender that, as a standard of business, will not overcharge you and will treat you as a valued customer.