If you are getting ready to buy, your first step should be to find a lender so that you can understand what you can comfortably afford. To do that, just like an agent, you need to find a lender that you can trust. But also like agents, there are A LOT of lenders out there.
So how do you know what questions to ask and how to find the right one?
As always, when we have a question, we always like to find experts in the field to help guide us.
To learn more about the mortgage industry, we reached out to our consumer-centric lender, Ross Varahrami, to help give you insight on how to find the right lender.
Here are Ross’s key points and tips that should help you get started to find the right lender.
Tips on selecting a lender
When choosing a lender, look not only at your lenders terms, but also at the company to ensure they also have good reviews. You can even google the company name and then "reviews" to learn more about the company's current state. Do they currently have pending lawsuits, are the majority of people complaining about the same thing, or did they just win an award for best service, etc.? While not all of these things will affect your specific lender, it will give you an idea about the company culture and where they place their consumer’s best interests.
Most lenders are dealing with an influx of refinances and home loans, especially right now. Some companies are better than others on timing, so ask your lender what their timeline would be for your loan to make it to the finish-line. As an example, let’s say that you lock in your rate for 30 days. If your lender is backlogged and not able to keep up with what’s coming in, there is a chance you could be delayed, which could be an issue if your 30-day lock passes and rates increased during that time.
Once you have an accepted offer on a home, things will move quickly, and you will need someone quick and responsive. Look for recent reviews about your lender that specifically mention timing. Whether good or bad, these reviews will give you an understanding of your lenders' current pace. To test the waters when choosing between lenders, leave them a voicemail or text and see how long it takes them to respond (do not email). This will be a great real-time gauge of the experience that is yet to come.
While lenders understand rules and regulations with each loan option, you will notice that some gravitate more towards a specific type of loan. You will want someone that has a lot of experience with your particular loan type.
As an example, if you are using a FHA loan, ask them what percentage of their volume is with FHA loans. FHA loans can require a bit more due diligence, so you want a lender that has the experience and can be proactive about issues and questions that may arise.
Where to find the best reviews
It is important to know that many rankings on review websites can be influenced by lenders that pay the entity doing the review. This is why I always suggest looking at multiple sites to get an overall view of the lenders service. Some of the review websites to research mortgage lenders include Trust Pilot, Better Business Bureau, Google reviews, Yelp, Consumer Affairs, Lending Tree, Trustlink.org, Facebook, Zillow, Social Survey, and BirdEye.com. You can also ask your friends and family for referrals. Keep in mind that they might have used that person based on their expertise with a specific loan, which might be a different type of loan you are looking to obtain.
Things to take into consideration when comparing advertised rates:
When comparing rates, you must READ THE FINE PRINT
. To have access to the advertised rate, you will have to qualify for very specific things in regards to credit, rate terms, amount loaned, etc.
Be cautious of a LOW APR. While it might be low, you will want to take into consideration the discount points and other costs that apply. As a reminder, discount points can be paid in exchange for a lower interest rate on the mortgage.
If you are considering paying for discount points, take some time to figure out your break-even point. A lower rate with high fees isn’t always going to be the best choice. An easy way to do this is to first figure out the difference in payments with and without paying the points. Next, divide the amount you would pay in points by the monthly savings. The result will be the number of months for you to break even, should you elect to purchase discount points.
Almost all lenders have the same rate available. What will set different lenders apart are the discount point costs for that specific rate option. This is why it is essential to do your due diligence and compare different lenders from different companies.
This was mentioned before, but because it is important, I thought that I would mention it again. Find out how long the terms would be locked for (e.g.- 30, 45, 60 days) in comparison to the lenders actual time it takes to make it to the finish line. This will ensure you do not have to pay thousands in rate lock extension fees or start back from scratch 30 days later.
Stay tuned for the next contribution with Ross that will discuss how mortgage referral platforms work and the difference between web based and local lenders. Have a question for Ross? Send him an email with your thoughts or questions about the mortgage industry at firstname.lastname@example.org
or check him out at www.mortgagewithross.com