Home Buying 101 - Step 6: Shop for a Loan
January 26th, 2007 categories: Home Buyers, Mortgages & Finance
This is the sixth installment in a series of twelve called Home Buying 101. Click here for the other articles in this series.
Once you’ve located a buyer’s agent, use him/her as a resource for a lender, inspector, attorney or anyone else you may need in the home buying process. Many agents will not begin to show houses to a client until they have obtained mortgage pre-approval from a lender - I am one of those agents. For this reason, some people choose their lender first. That’s alright if you either have a previous business relationship with the lender or were referred to them by someone you know and trust.
If you don’t know the lender, then be careful about picking one based on what you see on-line and what you discuss with a salesperson over the phone. I suggest finding the agent first and then asking them for a referral to a lender. If you’ve already started working with a lender and have obtained a pre-approval, you don’t have to stick with them if your agent suggests someone else. While you’re looking for houses, you can also look at other lenders.
Agents know who the best lenders are - we work with them personally and get feedback from our clients. There is a big difference in service, fees, rates and reputation among lenders. Also, your agent should be able to match you to a lender who can offer you the type of loan(s) that are best for you such as VA, FHA, CHFA, or conventional - not all lenders offer all programs.
This is an excerpt from an article I wrote called, “Your Dream Team - Finding the Best Homeownership Professionals,” regarding hiring a lender:
While your interest rate is very important, also consider the reputation of the lender, how the lender responds to your questions and the location of the lender. You need to be able to rely upon your lender to be available when needed (nights, weekends) and to be responsive to your needs.
- -Ask your agent or attorney for lenders.
- -Search for rates on-line at www.bankrate.com or www.hsh.com. Your local paper’s real estate section will also publish rates. Check local banks or credit unions, too.
- -Consider using a mortgage broker. A broker has access to more loan options than most banks. The downside is that their fee, which is paid by the actual lender, may get passed on to you. Check with the National Association of Mortgage Brokers at www.namb.org for local members.
- -Review all the loan terms before making a decision. Each lender will have a unique set of services and fees – such as points paid at closing, type of loan, private mortgage insurance, prepayment penalties, and rate lock-in fees and time period, to name a few. The Federal Trade Commission has a wonderful lender checklist for consumers on their website: http://www.ftc.gov/bcp/conline/pubs/homes/bestmorg.htm.
Whomever you choose, your goal is to get the best terms available to you.
