The most important part of the home buying process is financing. Determining how much you can afford and getting pre-approved for a mortgage are usually the first steps before you start your search. But how do you know if you are working with the right lender? And how do you know which loan program to choose? Here are some tips to help you get started.
Work with a local professional
Today, you can buy almost anything online, including mortgages. But despite the allure of online offers, borrowers should proceed with caution. If you’re new to the mortgage process or aren’t used to reading a loan estimate, you can easily end up paying more than you think. And with some companies, low interest rates are not guaranteed. You could be several weeks into a transaction and suddenly find that you are not eligible for the rate you expected.
With online lenders, it can also be difficult, if not impossible, to find a personalized experience. It’s true that many online lenders have loan officers who you can talk to on the phone, but beware, with some companies the person you’re talking to isn’t necessarily experienced. You might also find yourself jumping from person to person, and when you’re making one of the biggest financial deals of your life, having a single, trusted point of contact is invaluable.
And perhaps most importantly, in today’s competitive market, sellers tend to avoid offers that include financing from online lenders due to the uncertainties and potential mishaps.
“Name recognition and reputation go a long way, so working with a local lender can strengthen an offer and give buyers a competitive edge,” said Ben Clark, mortgage specialist at Dark Bank. “Listing agents and sellers want to be sure that the buyer is working with someone who is used to closing deals, and someone they can easily get in touch with should the need arise.”
Ask the right questions
The best way to start your lender search is to ask for referrals from family, friends and/or your REAL ESTATE AGENT. The Consumer Finance Protection Bureau recommends talking to at least three different professionals to make sure you’re making an informed decision. And when meeting with potential lenders, Freddie Mac suggests you “ask questions like you’re the hiring manager for a Fortune 500 company.” Here are some examples to start the conversation:
· How long have you worked as a mortgage consultant?
· Do you have experience with borrowers in a situation similar to mine?
· How do you communicate with buyers?
· What loan programs do you offer?
· What will my interest rate and annual percentage rate be?
· What is your pre-approval and closing process?
· What is your average loan processing time?
· Can you estimate and explain your fees?
· Do you manage the subscription internally?
· Are you going to hold this loan or sell it?
“And there should be just as much emphasis on the lender asking questions of the borrower,” Clark said. “In order to do our job effectively, we need to understand our clients’ unique situations. If a lender doesn’t ask you questions and listen to your needs, that should be a red flag.
Along with asking questions and comparing interest rates and costs, Clark says buyers should also make sure the lender is someone they feel comfortable working with. After all, when you take out a mortgage, you are entering into a long-term relationship.
“Not only do you need to have confidence in the product you’re getting, but you also need to be confident that you’re getting quality service,” he said. “Most people plan to be in a mortgage for 30 years, so make sure you’re working with a professional who’s looking out for your best interests and someone who sees the relationship as a true partnership.”
Discover all your loan options
When you speak with lenders, you will also discuss the mortgage programs available. Some lenders offer a wide range of products, while others specialize in one or two types of home loans.
Adjustable rate, 15-year fixed rate, 30-year fixed rate, FHA, VA, USDA – there are many options, but unfortunately there is no one-size-fits-all approach. You may walk into your meeting thinking you want some type of loan, but leave realizing there is a better option.
For example, if the down payment is an issue, you can hope to get an FHA loan. However, your lender may offer other options that better suit your needs, such as a low down payment conventional loan or using down payment assistance programs such as those offered by MSHDA or the City of Lansing. .
“A reputable mortgage company won’t try to sell you anything,” Clark said. “What they should do is lay out all the options, go over the pros and cons, and help you assess which product is right for you. Our goal is to provide all the necessary information so that our customers can make well-informed and well-informed decisions.
To find a list of local lenders, visit the Greater Lansing Association of REALTORS® website at www.lansing-realestate.com.