For many, shopping for big purchases can be a somewhat traumatic experience. Many dread the trip to a car dealership where they feel smothered by pushy salesmen. Mortgage lender shopping though? It can all be done in your PJs at home on the computer – and it’s pretty easy!
When you have made the decision to purchase a home, there are a few steps you’ll want to take first before you start touring those dream houses. Picking a lender and having your preapproval letter in-hand is definitely step one! This will prevent you from looking at homes outside of your price range or having your closing take more time than it needs to. But how do you find that perfect mortgage lender?
Know the law
Did you know that fair lending is legally required? The Equal Credit Opportunity Act ensures that everyone has an equal opportunity to credit. Thanks to the Dodd-Frank Act, discrimination in lending is explicitly prohibited and there are new requirements in place to protect borrowers from predatory practices. It prohibits discrimination in all forms with new requirements to protect those seeking loans from predatory practices. The Fair Housing Act does a lot of the same thing too.
It’s always good practice to make sure you are aware of your rights and the laws that may be affecting you.
Deciding on the type of loan
There are multiple avenues you can take when getting a mortgage for a home loan. Do research on each of them before you make your decision. Some are more appropriate for investment properties versus the home you intend to live in full-time. It is advisable that you seek financial counseling to understand the costs and risks associated with each option. Check out Military One Source for financial counseling! It’s free; use your resources to make smart decisions.
What’s the bottom line
As you shop for a mortgage lender, you’ll want to calculate the total cost information. These are the things you’ll want to add to your list to inquire about:
- The interest rate they are offering and ask what their annual percentage rate (APR) is. This rate represents the total cost of borrowing expressed as a rate of interest. When you get their rate information, make sure you ask if it is a fixed rate or adjustable – this is important and can greatly impact your monthly payment.
- Note what the lender charges in fees. These can include broker, attorney, recording, and underwriting fees. There will also be fees associated with your application, appraisal, and settlement costs. Each lender should be able to give you an estimate so that you have a reference to compare to others. Get it in writing!
- Down payment requirements. If you are NOT putting down 20% or utilizing a VA Loan, you’ll most likely have to purchase Private Mortgage Insurance (PMI).
Seek out the best deal
Once you have your bottom-line costs of each lender, haggle a little. Yes, you read that right! If one lender has a better rate or less closing costs associated with their loan – share that. See if the other lenders can match the deal you are seeking. You have the right to ask if they can waive or reduce certain fees. In the mortgage world this is expected, and negotiations are welcome. They want your business; make them earn it!
Good customer service matters
Okay – you’ve narrowed down your search and found the best deals. The deal breaker for most people tends to be how they treat their customers. Do some research on the company and read the reviews.
Two quick tips:
- Do lean towards lenders who take the time to answer your questions patiently and who readily give you the information you ask for.
- Don’t choose a lender who is pushy and not respectful of your home buying process. If they make you feel smothered like when purchasing a car, run away.
Word of mouth is incredibly powerful; people talk! Take the time to reach out to other military and veteran families and see how their experiences were. Google and social media are your friend in this process. People will share the good, bad, and the ugly. Use this to help you finalize your decision!