How to Choose the Right Mortgage Lender

Whom you choose as a lender can be just as important as your chosen real estate agent. Read on for insight on how to find the right lender for you, and why it's important to get pre-approval before you start house hunting.

It's not just about "the rate."

Mortgage lending remains a somewhat competitive business. There will be slight variations in interest rates among lenders, that can affect your monthly payment. Yet buyers need to pay attention to other fees that can cost more money out of pocket on the front end. More details below.

Choosing the right lender can have a significant impact on how smoothly your home buying process goes. And it's one of two critical steps to complete before house shopping, the other being your selection of a trusted REALTOR®.

Here’s a look at 5 steps to take when picking a lender, to ensure you have the right mortgage partner for you, with your pre-approval in hand, before house shopping!

1. Referrals. Get lender recommendations. Ask a friend or family member who recently bought a house. Check online reviews of prospective lenders. Ask your real estate buyer's agent for recommendations. Your buyer's agent should know proven lenders with reputations for closing loans on time, with the least amount of hassles. Note: Onsite new construction agents will usually have a lender recommendation, and may offer builder incentives when using their designated lender. It's recommended that you get at least one other lender to provide you a loan estimate for comparison. i.e. Make certain you're not indirectly paying for those seller incentives via higher fees, rate, etc.

2. Choose local. Don't be tempted by online offers from out of state lenders. Real estate is "local," so your lender should be too. Choosing a local lender has key advantages:

a) Local lenders know availability of loan products specific to your area, and can determine if you meet requirements or not, E.g.,down payment assistance, local tax credits, etc.

b) Once your have a purchase contract in place, you can choose to hand deliver required

financial documents for formal loan application; and handle any concerns face to face.

c) Confirm after hours availability. Traditional lenders are only available during routine banking hours. Often buyers find "the house" on a weekend. Will your lender be available remotely on a Sunday? To provide a property specific loan and payment estimate, and an updated pre-approval letter after hours? If not, you could lose out on "the one", especially a hot property with multiple offers coming in.

3. Pre-qualification or Pre-approval process? There's a difference. You need more than just an online credit check to get a "pre-approval." A good lender will review all pertinent details to get you pre-approved, including your credit history, your documented income, tax returns, and monthly recurring debt. The lender will confirm you can afford the anticipated monthly house payment (Principal, Interest, Taxes, Insurance) along with any HOA fees, with enough money remaining each month to satisfy your other obligations. Provided your recent credit history and income-to-debt ratio conforms with lender and underwriting standards, demonstrating high probability that your eventual loan will get approved, the lender will provide you with a pre-approval letter. Your agent will need this letter to present to a seller, along with your offer to purchase. A prudent seller is unlikely to consider the offer without it.

4. Get a written loan estimate. You shouldn't have to ask. Once you make preliminary application and provide your credit and income information to a lender, they're required to provide you with loan estimate (if pre-approved) or letter of denial, with explanation. The loan estimate disclosure will tell you much more than the anticipated monthly house payment. It should show lender fees, interest rate, cost of appraisal, and other estimated closing costs. You can place the loan estimate side-by-side with that of another lender and compare.

5. Contract to Closing Timeliness? Ask for specifics about the formal loan application, once your purchase contract is in place. What's the process? Who handles the bulk of the processing? Most lenders originate the loan application, then pass along the facilitation of additional paperwork to a loan processor. The processor works with you to satisfy the lender, their underwriters, (and in some instances government agencies), to move the loan application along, toward conditional, then ultimately, final loan commitment. Provided that you and other parties to the transaction comply with requests, can the lender close on time? What safeguards does the lender have in place to avoid delays on their part?

Talk with a lender BEFORE looking at houses

Unless you're a cash buyer with liquid funds to buy real property, you'll need a mortgage. Having a great lender and taking the steps to get a pre-approval assures sellers and their agents that you're a ready, willing, and able buyer. Without it you won't be perceived as a serious buyer.

Happy house hunting! Follow @TroyGrimesREALTOR, on social media for market updates and tips.

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About the Author: Troy Grimes is an actively licensed NC real estate broker, and principal Member-Manager and Broker-in-Charge of Troy Grimes Realty LLC. His firm specializes in general brokerage services of re-sale and new construction homes in the greater Raleigh, NC region and surrounding areas. You may connect with Troy via email at homes@troygrimes.com or for more info visit https://www.showandsellraleighhomes.com

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