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Here's How to Choose a Good Mortgage Lender to Get the Best Deal

How to Choose a Good Mortgage Lender
It is important that you avail a loan from the right lender in order to get advantage of the best deals. This WealthHow post will tell you how to choose a good mortgage lender.
WealthHow Staff
Last Updated: Mar 26, 2018
"If you pay off your mortgage before retirement, you take a huge financial load off your shoulders. You also become eligible to take out a reverse mortgage once you turn 62."
― Suze Orman
If you are planning to get a good mortgage loan, don't just settle for the first company which someone recommends to you. Frequently, we hear about fraudulent mortgage companies duping borrowers for a large sum of money. In order to avoid this, it is advisable that you shop around for a mortgage lender who will understand your requirement and cater to it. Understand which kind of loan you want to avail: one with an adjustable interest rate, or a fixed one. Adjustable rates have a tendency to rise after 3, 5, or 7 years. This means that your monthly payment will also increase with a rise in the interest. Fixed rate loans for a longer duration have higher rates as compared to those for shorter ones. If you haven't planned for this, it will become a burden for you. Hence, you have to be absolutely make sure that you have entrusted your money in the right mortgage lender. Conducting a cost comparison and negotiating the rates with lenders can help you to get a better price. Here are a few more tips that will help you choose the best lender or broker.
Conduct Interviews
Interview
You must first identify your mortgage requirements and list them out. After a basic market research, call the representatives of the shortlisted mortgage lenders for an interview. Ask them all the queries you have about the interest rates, APR, closing costs, monthly payment, etc. Observe their answers and how they convince you that their loan is the best suitable option for you. Do not get overly impressed by the persuasive marketing and advertising of these companies. Many lenders are only interested in selling the loan to you, and will make tall promises and claims. So, select a mortgage lending company that knows how to walk its talk. It is best to ask them all the details regarding the loan in writing or on email.
Explore Options
It is not necessary that you have to avail a mortgage loan from private companies. You can utilize government loans or FHA loans at lower rates of interest for buying a house. Apart from these, banks also offer mortgage loans; hence, you should check them out. If you are member of a credit union, you will be able to get a loan at affordable interest rates. Hence, explore all the options before zeroing in on a lender.
Mortgage Broker
Mortgage Broker
While a mortgage broker does not offer a loan himself, he will help you out by finding the best suitable loan option for you. He will act as an mediator between the mortgage lender and you, and will help you complete all the formalities. Remember that an unethical mortgage broker can mislead you into availing a loan that may be too expensive for you or with the wrong company. Hence, check out the BBB website to know what kind of complaints have been filed by people against him. Visit the National Association of Mortgage Brokers (NAMB) and find a genuine broker who has the organization's 'Lending Integrity Seal of Approval.'
Recommendations
Loan Broker Or Agent
It is always better to ask your family, friends, and colleagues who have availed a mortgage loan recently for a lender recommendation. You will instantly get a few trusted names through this method. You can then carry further compatibility and credibility research before zeroing in on one. You can also consult your local banks to get a few good names. Asking your financial adviser and reputable estate agent will also help you get a few trusted mortgage lenders. Don't just blindly follow what others tell you, and promptly ask 'why' they think the lender will be suitable for them.
Lender Type
There are several players in the mortgage market. Some of them are well-established, bigger companies and banks, while there are others who are small players. Both large and small companies come with their own share of pros and cons. Large companies may offer you better facilities like online transactions, automatic mortgage deduction payment reminders, etc. Most importantly, they will be well-managed and will have credibility. Also, the chances of any kind of frauds are minimized. Small players, on the other hand, offer prompt customer service, immediate redressal of doubts, and better interest rates. However, trusting a little-known company can turn out to be a wrong decision in the long run.
Compare Rates
Comparing Interest Rates
One of the easiest ways to understand which mortgage lender will prove beneficial for you is to make a table listing out all the interest rates and carry out a comparison. It is important that you also add columns giving details of lender fees, loan points, taxes, and insurance cost. This will give you a fair idea about loan from which lender will be cost-effective. Remember that low interest rates are not the only parameter to decide which person is the best. You must also check if there are going to be any kind of hidden charges or expenses that will increase the loan's cost for you.
Customer Service
Customer Service
Throughout your loan-acquiring process and even after it, you will require assistance right from the application stage to the repayment one for solving any queries related to it. However, your loan officer will be a busy man or woman and will ask you to dial the lender's customer service for any kind of doubts. Check the lender's website if he has received any customer service awards. Remember that your relations with the lender will extend over a period of years, so you must find a company that offers prompt, accurate, quick, helpful, and knowledgeable customer service.
Pre-qualification
Bank loan
Ask the prospective lenders to give you a pre-qualification amount based on your credit. This will help understand the amount of money they will be lending you, and also give you an idea about your monthly payments. While this does not directly prove to be a parameter for judging which mortgage lender is good for you, it will definitely help understand which one will offer you a higher pre-qualification. You have an option of going with the lender who gives you a good price range or with the one who has a relatively lower pre-qualification but weighs better on the interest rates. This will also help find houses which will fall within the range of the pre-qualification.
Reputation
Analyzing Performance
One of the ways to find out about the lender's reputation is to check the reviews on the BBB (Better Business Bureau) website. If a lender operates in multiple states, ensure that you verify the BBB score in all of them. You can also visit the website and social media pages to understand about the experiences that people had with the company. Apart from this, you can also check the lender's reputation and public standing from the Chamber of Commerce. A general search on the Internet will give you results where people will be discussing the strengths and weaknesses of these lenders. All this will help choose the right one.
Good Faith Estimate (GFE)
A genuine mortgage lender will hand you the Good Faith Estimate (GFE) within the first 3 days
of applying for loans as slated by the Real Estate Settlement Procedures Act (RESPA). It can be emailed or faxed to you easily. It will give you a list of all the costs related to the mortgage loan including the fees, title charges, inspection costs, charges of government, etc. It will help compare the rates of various lenders. Remember that it is only an estimate, and the final figure may change. However, a good lender will not allow too much disparity in the numbers. A genuine lender's final cost will be somewhere near the estimate itself.
Truth In Lending (TIL) Disclosure Statement
Disclosure Statement
A genuine mortgage lending company will also hand over the Truth In Lending (TIL) Disclosure Statement to you if you avail a fixed rate loan. It is ruled by The Truth in Lending Act (TILA) of 1968. It helps understand the APR, total payments, finance charge, etc. It will give you a fair idea about the total amount of loan and your liability.
Consultative Approach
Signing Papers
Many mortgage companies only co-operate till the time you sign on the dotted lines of the mortgage papers. They are only interested in booking their profits and may make you avail a mortgage that will prove more beneficial for them rather than you. Find a lender who will not only sell you the loan, but will also inquire about your financial plan. The loan officer will guide you to get the right mortgage which will fit in the scheme of your financial plan, cater to your requirement, and will not become a burden for you over a period of years. He will also give you ideas to increase your credit standing.
Try to have a good credit score to get better interest rates. No matter which lender you choose, plan to pay off your loan over a certain period of years. Avoid paying any application processing fees before you finalize the lender and fix the rate of interest. Mortgage loan transactions can be very complex. Hence, it is advisable to consult industry experts instead of ending up trusting the wrong mortgage lender.