If you’re a first time homebuyer just beginning to think about a mortgage, you may be surprised at the number of options available to you. To begin your search for financing, ask for referrals from friends who have recently purchased homes. Real estate professionals also can provide recommendations of mortgage banks and individual lenders they’ve worked with in your area. Once you have a preliminary list of potential lenders, the best way to evaluate their positives and negatives is to call or stop in for a preliminary appointment.
Start with a prequalification
Obtaining a mortgage prequalification provides you with a good opportunity to work with mortgage banks prior to making a formal loan commitment. Plus prequalified buyers can gain an advantage in the real estate market. A prequalification letter signals to sellers and real estate agents that you are serious about a home purchase and understand how much you can afford. As you work with lenders through the preapproval process, take note of how responsive the person is to your requests and phone calls. Also, take note of the mortgage product offered by the lender to compare rates and terms to other banks.
Mortgage bank characteristics
Different lender characteristics can appeal to different homebuyers. For example, ask yourself if you prefer working with a large bank or a smaller mortgage lender who is familiar with your local area. If you are looking for a nonconventional loan, such as a VA loan or an FHA loan, you will want to seek out a mortgage lender with expertise in that particular area of the market. Also, check online reviews and Better Business Bureau ratings to get a feel for a lender’s local reputation.
Incorporate all interest and fees for a true comparison
No one wants to overpay for a mortgage, so don’t forget to compare the rates and fees of different mortgage banks before making a final selection. Draw up a side-by-side comparison to help you remain objective. Include rates, fees, turnaround time, and any quantitative factors that are important to you. Reviewing the loan payment schedule will also demonstrate the breakout of mortgage versus interest for each payment of your loan, using different terms and rates.
Shopping around for a mortgage lender prior to conducting a real estate search will streamline the buying process once you find your dream home. Make sure that you feel comfortable working with your assigned loan officer, and don’t hesitate to ask any questions that come to mind before you enter into a mortgage loan commitment.
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