If you’re in the market for a new home, you’re probably in the market for a new mortgage. With record low interest rates, you are not alone. Here is a list of 5 rules to remember when looking for a mortgage lender.
1. Know the Terms
All the terms of a loan matter. Unfortunately, shopping for a mortgage is not as simple as finding out how much a lender will let you borrow and at what interest rate. You’ll want to get a complete breakdown of what any offer your receive means to you on a monthly basis as well as how much money you’ll be spending over the life of the loan. This is not the time to be shy. Ask questions. If your lender can’t explain them to you, you may not be a good fit. Here is a great list of Mortgage Terms put together by FHA.com. If this list is too long, not to worry, I have put together a great list for you in my Buyer’s Guide that I will share with you. See below for details.
2. Understand how Lenders Operate
One of the first questions your potential lender will ask is about your credit score. This is how they base their decision about your loan amounts and interest rates. It reflects your ability to pay them back. The higher your credit score, the easier it will be to get the amount and rate you want. So do your research and find your credit score before you start looking for a lender. There are great resources out there to increase your score, if needed.
3. Not All Mortgages are the Same
There are several mortgage types available to residential home buyers. Most people will shop for a traditional fixed rate mortgage, but other options are available including adjustable rate loans (ARMs), Federal Housing Administration loans (FHAs), and Veteran’s Administration (VA) loans. You’ll want to be sure to understand what kind of loan a lender is offering you. Ask if other types of loans are available to you and how the breakdown would differ. Some people are looking for the lowest possible monthly payment while others are more concerned about paying back less interest. Let you lender understand what you are looking for and why.
4. Fees, Fees, Fees
Most loans have fees associated with them in additional to the principal amount borrowed to buy the home. You can sometimes borrow the money need to cover these fees, but that will obviously increase the overall amount of debt you undertake. Some fees are paid up front, and others are not due until closing.
If you’d like to chat with me personally about how to shop for a mortgage and what other questions you can ask lenders to find the best deal, give me a call at any time. I’m happy to get you started on the right path so we can start looking for your new home!
5. Shop Around
Just like shopping for any big investment like a car or expensive equipment, do your due diligence and speak with at least 2 lenders. Make sure you can communicate with them and feel comfortable about what they are telling you. You should not feel pressured when working with them. This could be a long term relationship if you decide to wait a few more months so the person you choose should be accessible and easy to work with.
So, this was just 5 rules to remember when looking for a mortgage lender. They are just some of the things you should consider when thinking of buying a home. It will make you more knowledgeable and in control of the process. For more great information on how to be prepared to buy a home, click below for a FREE eBook on Home Buying in 2021.
And as always, please reach out to me anytime. I’m here for you!