Whether you are a first-time homebuyer, or have outgrown your current home and are looking to upsize, searching for a place to live takes time. You painstakingly consider all of your options, from selecting the right school district to wondering if the back yard is big enough for a swimming pool. You also need to take your time choosing the right mortgage lender that will help make it all happen.
Today’s borrowers have more choices than ever. Banks, credit unions, and non-traditional online-only lenders are all competing for your attention. So how do you choose a mortgage lender that’s right for you?
Know your credit score
Before starting your housing search, it’s first a good idea to check your credit score. This three-digit number, ranging from 300 to 850, gives lenders a snapshot of your financial history and determines your credit risk. Mortgage lenders use your credit score to determine the loan terms and interest rate.
The three agencies that collect information determining your credit score are: Equifax, Experian, and TransUnion. The information they gather is compiled into a credit report, a statement about your credit activity, loan-paying history and credit accounts. For more on how to check your credit, go to AnnualCreditReport.com. By law you’re entitled to a free copy of each credit report every 12 months. Fannie Mae, also known as the Federal National Mortgage Association, has some helpful resources.
Talk to your friends or family about which lender they used to finance their home purchase. People are usually happy to tell you about their experience. Consider starting your mortgage search with the bank where you have your checking and savings accounts. Your bank knows who you are and has a vested interest in helping you achieve your financial goals.
Research loan programs
Check to see if your lender offers mortgage programs that fit your situation. Some programs for first-time home buyers can help with down payment assistance, plus they may offer free education classes on how to become a homeowner. There are programs with affordable loans for public servants, veterans, or people with student loans, too. These programs vary state-by-state so research what’s available near you. Don’t hesitate to ask a mortgage lender about which program is best suited for your current situation as well, they are able to recommend programs based on a variety of criteria.
A pre-approval proves the lender is willing to loan you a certain amount of money. A pre-approval gives you an idea of what your mortgage payment and interest rate will be if you borrow that amount. A pre-approval letter from a lender can help you buy a home, giving the home seller assurance that you have the finances to back your offer. In hot real estate markets, it pays to shop for your loan before you shop for your home.
When you request quotes from a lender, you’ll want to compare the annual percentage rate, also called the APR, and any origination or processing fees. The APR encompasses not only the interest rate but any charges you may be required to pay, expressed as a yearly rate. According to the Federal Trade Commission (FTC), shopping around for a mortgage helps you secure the best deal. Know how much of a down payment you can afford, and make sure you understand all of the costs involved in the loan. The FTC website has a list of questions you should ask lenders. The Internet makes it easy to shop for mortgages, but do your due diligence, because it’s important to find the perfect lender for you. You can search for mortgage lenders accredited by the Better Business Bureau and look up their ratings, or talk to a trusted banker for advice.
If you have questions about a mortgage, we are here to help. At Citizens Bank, we want to ensure you make the most of your banking experience with us. Visit our Mortgage Experts page to find the easiest ways to get in contact with our Mortgage Team