How to choose a mortgage lender

Before you and your real estate agent venture out to look at even one house, you need to speak to a mortgage lender so you’ll have an idea of how much house you can afford and what kind of loan (Conventional? VA? FHA? Other?) you can secure. But how do you choose the best mortgage broker among all those vying for your business?

Your real estate agent will probably recommend someone he or she has worked with and trusts. If you’d like to compare lenders ask your agent another recommendation. There’s no financial advantage for the agent if you choose their lender, but every agent wants a reliable mortgage lender on their team. Friends and colleagues who have recently bought a home are another good resource.

There are two basic types of lenders; wholesale lenders and mortgage brokers. A wholesale lender underwrites mortgage loans, usually through a bank or a mortgage lending company. Brokers, on the other hand, act as a go-between, helping find the best loan for a home buyer’s particular circumstances. Nationally, mortgage origination is split about 50/50 between wholesale lenders and mortgage brokers. It’s up to you to choose which fits your needs.

Avoid any lender who you can’t meet with face-to-face. On-line mortgage providers are known to offer free credit reports or other goodies to get your business. But, on-line mortgage services may not know your particular needs and frequently, can’t be reached when you most need them, outside of regular work hours. Plus, there’s nothing more disappointing than showing up at closing to find that the lender has dropped the ball, the mortgage money isn’t there – and the lender is ‘on another call.’

Look locally to find a good mortgage lender. You should feel comfortable with your lender and your lender should answer any questions you might have. A mortgage lender is an essential part of your real estate team and will be working with you throughout the entire process.

Before you interview any lender, have a good idea of how much money you have for a down payment and how much of a monthly mortgage payment you can afford. When you first call a lender to set up a meeting, ask what paperwork you’ll need to bring – usually pay stubs, tax records and the like. Your lender should offer you what is called a good-faith estimate on several possible prices, showing you all the true costs of getting a loan as well as the interest rate, and your monthly payment. If they don’t offer it, just ask and they should be happy to provide it.

When you interview a lender, pay attention to the terms of the loan package you’re offered. A loan with a low interest rate might come with high points (an extra charge based on the amount of the loan) or other excessive fees. Also be aware of disproportionate claims. Respectable lenders will do their best to get you the best deal, but they won’t make promises they can’t keep. As with anything else, if it sounds too good to be true, it probably is.