The What Why and How of Choosing a Mortgage Lender

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Are all Home Mortgage Lenders Alike? No, not all of them are alike. More importantly, some mortgage lenders are better suited to your personal and financial reality, than others. The goal of this article is simple; provide you with simple but tried and tested guidelines to help you pick the top mortgage lenders.

Get all your ducks in line before talking to any home lender. You want to put your best foot forward because chances are, your conversation will be part of your record. This means:

  • You know the net income of your household.
  • You have streamlined your expenditures for the past couple of months and have at last 30% surplus NET income.
  • You’ve pulled out a recent copy of your credit reports. Preferably, you have excellent scores above 720 FICO. But anything above the state median is doable.
  • Preferably, you have a savings account amounting to at least 10% of the purchase price.

Best Rated Mortgage Lenders vs. Top Mortgage Lenders

At first glance, you might think both terms are synonymous. But they’re not! The former are lenders that actually provide quality loans that satisfy, are reasonable, and can be paid off by the borrower until the last amortization. Simply put, they are the best because consumers are satisfied with the value of their service. Think quality loans.

Top mortgage lenders, on the other hand, usually refer to the big lending institutions like Wells Fargo, GMAC, Bank of America, etc. These lenders are rated “top” because of the sheer size of the lending institution and the volume of loans they churn out every day. Think quantity of loans.



First Mortgage vs. Refinance

The best lenders work with the homeowner’s budget. In this regard, make sure to stick within 20% to 30% (max) of your net income. Anything more and you might find yourself foreclosed on and living in a manufactured or mobile home. Never assume you will earn more in the future, rather, it is better to assume the opposite.

For refinance loans, make sure to have better overall terms. A refinance should never be done solely to push back overdue debts. You need to look into better loan rates, and better loan terms.

Mortgage Terms and Interest Rates

More often than not, there is too much emphasis on interest rates, so much so that borrowers get undercut on the loan terms. As a general rule, a fixed interest rate is the best option for most borrowers. This way, you know what you pay for from the first to the last amortization.

Don’t forget to read the contents of the promissory note. Pay special attention to acceleration clauses, grace periods, notice and payment requirements, etc. Look at the closing costs. Look at each item and ask what it’s for. You want to make sure that mortgage lenders aren’t overcharging on “notarization costs”, or charging “miscellaneous fee”, that cannot be substantiated.

Local Lenders vs. Multi State Operations

There are pros and cons for both local lenders and Multi State Lenders. Local lenders are more accessible to you, and chances are you know the people who work there! Multi state lenders usually have more offerings both in terms of properties and loan terms. At the very least, you want a lender with a branch office near you. Remember, a mortgage lender without a branch office within state is a no-no! no physical location means dodgy home mortgage lenders.

The bottom line is to pick a lender that has the perfect property for you. Never settle for what the agent insists on. Demand to get what you want (within reason) or find another lender!

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