7 Key Factors To Consider When Choosing a Mortgage Lender

If you think all mortgage lenders are the same, you could be setting yourself up for a frustrating experience. Working with the right lending partner is one of the most vital decisions you’ll make.

With so many mortgage companies vying for your attention, the choice can be overwhelming. To help you decide, we’ve created a list of seven factors to consider before you choose your mortgage lender.

#1: Reputation in the Community

Instead of randomly choosing a lender from a Google search, do some digging to find the one that has a stellar reputation. Read online reviews and talk to friends, family and co-workers who’ve recently purchased a home. By gathering this information, you can use the negative reviews to quickly rule out some of your options.

#2: Recommendations From Experts You Trust

Talk to your real estate agent to see who they work with most. Remember, they want your mortgage process to move along seamlessly, so the property can close (and they can get paid). Since they’re in the industry, they probably have a handful of mortgage lenders they like working with best. Your agent can give you additional insight into which one would suit your personal situation (for example, which ones work well with first-time homebuyers, etc).

#3: Loan Products They Offer

Some lenders offer a wide array of mortgage loans, while others focus on just a few. Find a lender that can give you good terms on the mortgage product you want to use. If you’re a veteran or active military person, you’ll want a lender who offers VA loans. If you’re purchasing a home in a rural area, you’ll need a lender who offers USDA loans.

You can typically find this information on the company’s website, which will also tell you if they provide adjustable and fixed-rate mortgages; 15-, 20- and 30-year mortgages; and other mortgage types you might be interested in pursuing.

#4: Interest Rates

Another crucial element to consider when choosing a lender is the interest rate they can offer you on your mortgage loan. Since your mortgage will take several years to pay off, even a quarter of a percent higher interest rate can cause you to pay thousands more over the life of the loan.

Some lenders may be able to offer better rates than others, giving you a slightly smaller monthly payment.

Remember that you’ll need to let a lender pull your credit before they can answer the interest rate question. Credit scores indicate the level of risk associated with loaning money. They directly influence the interest rate you’ll pay.

#5: Fees They Require

Mortgage fees can add up to 5% or more of the home’s price. Keeping them as low as possible is another reason to carefully choose your lender. Ask lenders for an estimate of itemized fees that you can review against other lenders. You may see that one has slightly lower fees than others, which will save you money at closing.

Also ask if they let borrowers purchase discount points on the mortgage. If you purchase points, you pay money up front to secure a lower interest rate that can save you money in the long run.

#6: Their Loan Process Timeline

When you find the home you want, you don’t want to sit around for months waiting for closing day. Before you pick a lending partner, ask them how long their average loan process has been during the past six months. If its over eight weeks, you can keep looking for one who can get you closed and in your home faster.

#7: Their Customer Service Approach

The mortgage process is stressful enough without dealing with a lender who won’t answer your questions or return your call. As you research lenders and ask for recommendations, don’t just focus on numbers. Ask questions about how helpful the lender was during the process. Did they keep the borrowers informed? Did they request information in a timely manner to keep the process moving forward? Were they clear about the types of documents the borrower needed to produce?

Choose a lender who offers proactive, thorough customer support. It will give you peace of mind.

Before you choose the lender you want to work with, explore these crucial tips to help you choose. They can help you ask the right questions and gather the information you need to make an informed decision.