Interviewing your Lender or Mortgage Broker
When searching for money to loan for your new home, it is a good idea to start interviewing your lender or mortgage broker to make sure that you have picked the right one. There are thousands of options out there. The wrong choice could cost not only your time, but money, and the home of your dreams. You want to be sure that your lender is well experienced in the entire loan process.
Picking your lender is a very important part of the process. Each lender has a different set of product they offer. There are many guidelines which lenders must follow. The lender will review your information and do their best to match you with the product that they feel is best for you. But, you have a job to make sure that you are getting the best possible deal. In oder to understand if you are getting the best rate, understand the terms. Once you learn the lingo, that will help you get ready to get the best deal.
Shop around – pick 3
Typically the best process for getting a great rate is to shop around. But, too much shopping can cause your credit score to drop. A general rule for shopping is to pick 3 lenders. Once you have the name of three lenders you are going to speak to, you should get your information together. By having everything that is needed to provide the lenders, you can give them all the information they will need to give you their best rate. Click here to get the complete checklist.
Call the three lenders and make an appointment to meet with them. I would recommend that you meet them on the same day. You want to meet them all within a few days of each other, but the bast is on the same day. Go to each lender and tell them that you are shopping around today for the best rate. I would not recommend you giving the information from one lender to the other. Have the lender provide what they think is their best rate. But, make every effort to have the same purchase price and loan amount. At the end of each day, you will have three estimates. Each estimate will provide you with payment amount, loan amount, interest rate and a series of other items. Now comes the fun part. You want to sit down and compare apples to apples and oranges to oranges. When you look at the estimates, look at the loan amount first. If all the loan amounts are the same, look at the interest rate. If you shopped on the same day, many times the interest rate will be the same which will make it easier to compare the estimates. If the rates are not the same, circle the higher ones. They may be ones you will want to avoid, but don’t cross them off just yet because one lender may have higher closing costs by purchasing down the interest rate through points.
Lenders will also under inflate the closing costs through the prepaids and proration section of the estimate. Prepaids are items that you will need to prepay to get the loan. These items are placed in your escrow account for the bank to pay when they become due. For example, home insurance and property taxes. One lender may collect upfront one year of property insurance while another will put 4 months on the statement. If the homeowners insurance for a property is $2500. The difference in your closing costs upfront is $1,250. These are items you will have to pay over the term of the year. These are not necessarily a cost that is lost money like lender fees and interest. Each lender has their own fees. Look for words like loan origination fee, underwriter fee, processing fee, application fee, and credit report fee. Some of these items are negotiable. Other items such as title insurance, recording fees, city and county stamps, transfer taxes and prorations for homeowners association and property taxes are not negotiable.
Here is a starting list of questions for Interviewing your lender of Mortgage Broker.
- What are the most popular mortgage loans you offer?
- Which type of mortgage plan do you think would be best for us? Why?
- Are your rates, terms, fees, and closing costs negotiable?
- Will I have to buy private mortgage insurance? If so how much will it cost and how long will it be required? NOTE: Private mortgage insurance usually is required if you make less than a 20 percent downpayment, but most lenders will let you discontinue the policy when you’ve acquired a certain amount of equity by paying down the loan.
- Who will service the loan? Your bank or another company?
- What escrow requirements do you have?
- How long is your loan lock-in period (the time that the quoted interest rate will be honored)? Will I be able to obtain a lower rate if they drop during this period?
- How long will the loan approval process take?
- How long will it take to close the loan?
- Are there any charges or penalties for prepaying the loan?
- How long have you been in business?
- How many loans do you close a month?
- Is your loan processor in house? closing department in house?
- Is there anything that you see which could cause me any problems?