Purchasing a property is an expensive undertaking. Even the most affordable homes are quite expensive; thus, it’s quite impossible to buy a house in cash. This creates a need for potential homeowners to turn to mortgage lenders for financing.
A mortgage loan will help you fill the gap between the house’s asking price and how much deposit you have. Thus choosing the right mortgage lender is a crucial aspect of your homeownership journey.
Below are seven key factors to consider when selecting mortgage lenders.
1. The Mortgage Company’s References and Reviews
Every business has a reputation, and a simple online check can reveal a lot about the company. Look through the company’s online reviews to understand how their former customers feel. During the search, look at the following issues:
- Are there any unresolved complaints and lawsuits?
- Is there a recurring issue or complaint?
- How well does the lender handle customer complaints
- How is the company’s customer service?
Most mortgages run for 15-30 years; thus, choosing the right lender will eliminate many headaches down the road. If you know someone who has a mortgage with that particular company, ask them about their experience. Friends and family can also be a source of information.
Remember that not all reviews will be positive. Mistakes happen, and customers may feel quite unsatisfied. However, if a company’s negatives outweigh the positives, it’s time to consider a different option.
2. Additional Fees
Different lenders have varying fees for certain services. Don’t mistake fees for interest rates. Your interest rate will be determined by your financial standing, credit history, and the financial service industry.
When meeting with potential mortgage companies, request an overview of their fees, the services offered, and an estimate of their closing cost. Ensure this information is communicated to you in writing for easier comparison.
Some lenders have higher fees than others. Thus, as a potential homeowner, it’s essential to shop around and compare different lenders before settling for one that suits your needs.
The main aim is to get a lender with the lowest fees and the best loan terms. Fortunately, there is an online platform where you can compare the fees and rates. This resource will also help you compare and contrast different lenders and their competitive rates in the market.
3. The Lenders’ Qualifying Requirements
All lenders have different qualifying requirements concerning percentage down payment, debt-to-income ratio, acceptable type of income, and borrower’s credit score. Ensure you meet the mortgage company’s qualifying requirements before making a decision.
If you have higher borrowing power, meeting these requirements may not be an issue unless you want a company with lower deposit or down payment requirements.
On the other hand, people with poor credit scores may face a few limitations. However, there are still a few companies that offer loans to such individuals.
4. Your Interaction With the Lending Company
If you’re a first-time buyer, you may have numerous questions about the borrowing process. This is where to consider your interaction with potential lenders.
Looking for a loan to purchase a home may feel like an impersonal process, but this should not be the case. Many mortgage companies pride themselves on creating long-lasting, mutually-beneficial relationships with their clients. Below are essential things to consider:
- How comfortable does the representative make you feel?
- Did they answer all your questions to your satisfaction?
- Did they offer you honest advice, or were they more interested in marketing their company?
- Did the mortgage company representative seem genuinely interested in helping you?
Lenders who offer personal interactions with clients and answer questions quickly are more likely to make you feel comfortable. Steer clear of lenders who are unwilling to answer your questions or seem evasive.
5. The Lender’s Preferred Process of Loan Application
Different lenders in the market have varying application processes. While some have a completely-automated application process, others prefer in-person meetings with a loan officer to help with the application.
If you’re a first-time homeowner, you may need a loan officer to guide you through the process. Lenders with online application processes may not be ideal for you.
On the other hand, if you prefer the automated process or you don’t like visiting the bank in person, an online application is the right way to go.
6. The Types of Loans Offered
There are different types of mortgage loans today, including conventional loans and government-insured loans. Conventional loans are not government-backed, come in different variations, and have more strict qualifying criteria. Some come in smaller down payments, while others have more significant loan limits.
Government-insured loans are backed by the government, which assures the lender repayment in case you default. These loans are backed by organizations such as the USDA, VA, and FHA loans. Talk to your lender and find out the types of loans they offer.
Government-backed loans are easier to qualify for due to lack of financial limitations and lower down payment requirements. They also ideal for individuals with a high debt-to-income ratio and a poor credit score. Ensure you select a lender that offers the loan service that you’re looking for.
7. Good Customer Service
Settling for a company with poor customer service will be the foundation of a frustrating journey. You want to work with a company that addresses all your concerns and answers your questions on time. Excellent customer service also means being kept in the loop about your loan approval process.
According to a survey, about 70% of customers would spend more money if it means getting excellent customer service.
Now You Know What to Consider When Selecting Mortgage Lenders
As a first-time homeowner, the best thing you can do is shop around for a mortgage lender. With hundreds of lenders in the market today, distinguishing the ideal company for you can be quite a hustler.
Compare online reviews and ask for recommendations from friends and family members. Customer service, fees, and qualification requirements are essential factors to consider when selecting mortgage lenders. The above factors help you make an informed decision.
For more informative tips, check out other blog posts on our website.