There is a huge misconception among homebuyers that the best lender is the one who offers a product with the lowest interest rate. Here is why this may not be the case:
The rates advertised may not apply to the loan product you want.
The actual Annual Percentage Rate (APR) may be much higher.
Bait & Switch is still alive and well in the mortgage industry.
Although I’m not a finance expert, my best advice is to shop by comparing each company’s APR. This figure reflects the annual percentage rate with points and fees included. We’ll get deeper into this in a moment.
When shopping for a mortgage lender, the best place to start is to get a recommendation from your real estate agent.
Two Types of Lenders
Bank & Credit Union: Find out what rates and products your bank or credit union offers and compare them to other lenders.
Mortgage Broker: These mortgage professionals shop for you from various loan products with various lenders.
When you call or visit lenders, look into the following aspects of their loan products:
Request the lender’s current interest rates and ask if these rates are the lowest for just that day or the week and if the rates quoted are for adjustable or fixed mortgages.
If you are interested in an adjustable-rate mortgage, ask when the rates will increase, how the rate and payments will vary, and whether or not payments will decrease with a rate reduction.
Ask the lender for the loan’s APR, which, as mentioned earlier, represents the yearly rate and includes points, fees, and other charges.
Request that the lender or mortgage broker express the points as a dollar amount. This will make it easier to determine precisely how much you’ll be paying for the quoted loan and easier to compare it to other offers.
Fees are sometimes lumped together under one category. Ask the broker or lender to separate them so that you can compare the costs associated with this loan to other loans. Ask for clarification for any fee you don’t understand
If you won’t be using an FHA, USDA, or VA loan, find out how much the lender requires as a down payment. Also, ask if Private Mortgage Insurance (PMI) is required and, if so, how much the premium will increase your monthly mortgage payment.
As of August 2015, the Good Faith Estimate (GFE) form that the lender must supply to a borrower has been replaced with the Loan Estimate and Closing Disclosure. This form still itemizes the loan’s terms and fees, but it goes into more detail and is easier for consumers to understand than the old standardized forms.
The Closing Disclosure must be given to the borrower three days before closing.
The Mortgage Process
Here’s what to expect during the mortgage process:
Fill out and submit the loan application.
Your loan package goes to the processing department, where all the information is verified.
Your package is sent to the underwriter, who decides whether or not to approve the loan. If the underwriter approves your loan, you will be mailed a “commitment letter.”
These are just the bare-bones steps in the process, and no two applicants are the same, so your mortgage process may vary.
Whether buying, selling, or seeking valuable insights into the market, I'm here to be your trusted guide in the dynamic world of real estate. Feel free to contact me for a confidential discussion, where we can explore your goals, address any questions, and navigate the exciting path of real estate together. Your real estate journey is unique, and I am committed to providing personalized assistance tailored to your needs. Don't hesitate to connect; your next real estate adventure awaits!
Dani
734-623-9442
dani@danihallsell.com
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