How do I select a Mortgage company?WHAT'S THE BEST LOAN FOR ME?
How do I select a Mortgage company?
What to Consider in Making Your Selection
Determine the mortgage company you; feel the most comfortable with, can trust and feel confident in, there's more to it than the lowest advertised interest rate. Shopping for service takes time and work, your definition of good service could contain:
- Providing a free pre-approval.
- The loan officer is timely with all communications and commitments and they are delivered in writing (i.e. when obtaining rates you receive written confirmation promptly)
- The mortgage company notifies you of all fees.
- They provide guarantees that promote good service (i.e. closing date guarantee, rate match guarantee, etc.)
Along with selecting the mortgage source, you'll also have to compare loan costs, including the interest rate, broker fees, points (each point = 1% of the loan amount), prepayment penalties, the loan term, application fees, credit report fee, appraisal and third party costs.
Selecting the right mortgage provider can save you money upfront and over the life of your loan. The questions provided below are a step by step guide to help you find the best deal.
1. Are you a lender or a broker?
An important consideration, a mortgage broker's job is finding you the best loan, they do not lend money themselves. A good broker will shop for a loan for you, explain all of your options and assist you with the paperwork.
Mortgage brokers are in the business of selling mortgages. The interest rate you receive and the points you pay should be the same as if you went directly to the lender for the loan. The commission that the broker receives from the lender is negotiable, don't hesitate to ask the broker what his commission will be.
2. How are you paid?
How a loan officer is paid plays a big role in the rate they quote you. When a loan officer is paid based off a percentage of your loan amount, it is very likely they are adding to your rate to improve their compensation.Example:
You are purchasing a home with the loan amount of $100,000. The loan officer has a rate that they could offer you at 7% with zero points, instead the loan officer quotes you 7% with 1 point (1 point = 1% of the loan amount, which equals $1000).
3. Do you maintain the servicing on your loans?
Some companies maintain their servicing. After closing the loan, you payback the mortgage provider who initially provided you with the mortgage. If you do not like change than this could have an impact on the selection of your mortgage provider.
4. How long has your company been in business?
Recently, because of the surge in mortgage business, many new mortgage companies have opened. If the mortgage provider has only been in business for a few months, you may want to check out their previous experience. It's a good idea to check out any business that you are unfamiliar with, 2 places to start are the Better Business Bureau and the Mortgage Brokers Association.
5. Do you have prepayment penalties? (Is there a monetary penalty if you pay the loan off early)
If you pay your mortgage off before the specified time, do you have to pay the mortgage provider an additional fee over and above what is owed in principle and interest. Sometime lenders have prepayment penalties only on certain loan types, make sure to ask the provider about the program you are seeking.
6. When can I lock my loan and what type of lock options to you offer?
To lock a rate, you first fill out a mortgage application and a credit report is run with a mortgage provider. This step will eliminate having too many options open for the mortgage provider to adjust your rate in your process. You will also want to check if they have lock options with the ability to lower your rate, if interest rates drop while you are shopping for a home.
7. Do you charge to lock my rate?
Most mortgage providers charge you something to secure a rate. You want to find out how much and what happens to the fee if the property you are purchasing falls through.
8. How long can I lock my rate for?
If you know that you are not closing for 90 days, and the mortgage provider indicates that you can only lock in for a maximum of 60 days, then consider the next mortgage provider on your list.
9. Do you have in-house underwriting and processing or outsource it?
If a mortgage provider outsourcers any part of their process, this means that you will be working with more than just one company in obtaining your mortgage. How is the service with the other companies?
10. Do you provide a free Good Faith Estimate (GFE) on rate and costs prior to my deciding to go with you?
This is crucial in making your final decision, consider a Good Faith Estimate as a price tag prior to buying.