Unless you have been saving for awhile or your income doubles suddenly thanks to some unexplained serendipity, then you either wait until you can afford to pay in cash or apply for a loan to get a new house. This is when mortgage loans come in handy. However, finding the right mortgage lender is tricky to say the least since there are countless lending agencies at work. Here are four effective ways to find the best mortgage lender.
Know the Fundamentals
Prior to any sorts of engagement, take full control by being informed. For instance, mutual savings bank is similar to savings and loans, as both are focused on the community’s interests. On the other hand, credit unions are member-owned financial institutions offering favorable interest rates and easier membership access. Mortgage bankers and correspondent lenders are quite similar as they rely on other sources to fund your loans, and then potentially sell your servicing rights to other lenders or investors. This is commonly practiced by the smaller mortgage banks. Incidentally, mortgage for purchase of home rose by 1.2 percent, while the rest of the applications including refinancing fell by about 2.9 percent. Generally, there is about 49.10 percent rate of applications in the United States from 2007 to 2017.
Learn to Ask the Right Questions
There is an enormous number of mortgage lenders out there. This explains why it is very important to be inquisitive and use reliable resources to determine the most appropriate loan provider. Survey on mortgage borrowers showed that 47 percent of home buyers fail to compare lenders and this cost them money. Go straight to the point and ask for their interest rates. You may also ask them of the possible ways to lower this rate, and then put them side by side with the information from other lenders. One of the possible ways to lower this rate is by purchasing discount points from them. According to Les Krasmky, Executive Vice President and General Counsel to Silk Abstract Company, paying for points to lower the interest rate will decrease the monthly payment while increasing savings from accrued interest over time. Also, ask them for their preferred communication channels, response rate, turnaround time for application, your responsibilities for them in case you avail, required down payment, and the rules when waiving the mortgage.
Examine the Loan Documents
Pay very close attention to the Initial Loan Estimate and the Closing Disclosure. These will show the exact finance terms, closing cost responsibility, inclusions of loan, existence of home inspection contingency, closing date, and other essential information. Corelogic reported about 12, 718 mortgage application frauds have been estimated by the second quarter of 2016 and about 3.9 percent increase in the fraud risk index. The undisclosed agreements, third party risk, non-arm’s length transactions, and straw buyers account for about 3.2 percent increase in transaction fraud risk. Be wary of lenders who depict vague information regarding the process of lending itself. With the increasing risk of fraud, opt to keep shopping around for potential mortgage lenders until you feel confident with whom you find.
Get Your Credit Score Ready
Credit scores are used to predict the likelihood of repaying future loans. The average American credit score is 695. Scores are mainly dependent on the data showing how you handled your debts in the past, such as payment history, utilization and history of credit, applications, and types of credit. Higher credit scores are proven more attractive to potential lenders and gives you more power to qualify for loans, and make demands. Paying all existing bills, not just credit cards, on time will help to increase your credit score. Also, keep your credit card balance at 30 percent of available credit or lower. It will also be helpful to maintain all accounts active to boost your length of payment history and utilization. A regular monitoring of credit report will help to dispute any errors immediately. Consequently, a bad credit score will affect the process of application for some mortgage lenders. Luckily, there are specialized lenders who give chance even to those with low credit scores.
Mortgage payments lasts for about 15 to 30 years, thus, it is very important to pick the right lender to work with. After all, it takes more than just a good interest rate to determine if you’ve made the right choice. Remember that everything will turn out right if you pay close attention to every important detail regarding your capacity to pay and your loan policies as a whole.