When comparing mortgage lenders there are many things to consider. If you want to save time follow the below steps on how to compare mortgage lenders. Time is valuable and these six steps should help you find a good mortgage lender:
Step 1: Shopping On Certain Days and Times
Shop and compare on the same day at the same time of day as interest rates can change frequently. While shopping note the mortgage rate and what day and time you saw it. Since mortgage rates can vary from day to day and even from morning to afternoon, the date and time of day are important to note along with the rate and terms.
Step 2: Low Interest Rates Versus Value
When you base your shopping on interest rates alone you are ignoring important things like experience, technology, security, service and responsiveness. A low interest rate being offered may come with little to no customer service (i.e. value).
Giving yourself peace of mind and making certain the biggest investment of your lifetime is in good hands has value. A lender can offer you experience, mortgage counsel and advice, rather than just selling you a low interest rate. The mortgage process can be a complicated and long journey, so choose a lender that will give you the best experience as well as competitive terms.
Tip: Refer to a lender’s reviews on Yelp, Zillow, and Google. If they have a mixed bag of reviews, you might consider someone else who has a better reputation.
“You cannot just shop price alone; you have to shop experience, team, technology and execution as well. If you are just shopping the bottom dollar you are potentially inviting poor quality, delays, and lack of communication.
Step 3: Request a Detailed Quote
When you get a rate quote also get a loan estimate. You need to analyze lender fees as well as the interest rate.
Mortgage Tip: The standard lock-in terms are for 30-days, 45-days and 60-days.
Step 4: Your Actual Credit Score
Do you know your real credit score? I’m not talking about getting your credit score from freecreditscore.com and the like, but the score a lender will get when pulling your credit. Typically the only way to get this score is from a mortgage lender.
The credit bureaus are required by law to provide you one free credit report a year. Unfortunately, the credit score is not usually included. A consumer credit report company, such as freecreditscore.com or creditkarma.com will provide an estimated credit score, but it can be inaccurate. So don’t be surprised if it does not match the one a lender has.
Lenders consider your credit history from all three credit bureaus: Equifax, TransUnion and Experian. From these three scores a lender will use the middle credit score.
Step 5: Debt to Income Ratio (DTI)
Debt-to-income ratio is one of the most important factors that is considered by your lender. The bank or lender will look at your DTI to determine if you can afford a mortgage loan along with your other debt payments. DTI is what percentage of your gross income a bank thinks you can spend on a new mortgage and your existing debts. This gives them the ability to assess your risk and financial standing.
When you request a quote from a lender, they will ask you about car loans, student loans, credit card debt, and any other mortgage debt you may have. They will not ask you about monthly expenses such as auto insurance, utilities, cell phone bills, etc.
Step 6: Property Types
Be specific on what type of property you want to buy, whether it’s a single-family residence (SRF), townhome or a condominium.
Multiple-family residential properties are often labeled as a duplex, triplex and fourplex, or possibly as a 2-unit, 3-unit and 4-unit.
Condominiums with less than 25% down can have slightly higher interest rates than for single family homes or townhomes.
Townhomes have homeowner associations (HOA) where monthly dues are collected to maintain the landscaping and maintenance of common areas, such as a pool or playground.
A townhome can be considered a condo or a PUD so it may be wise to check with your realtor about the exact type of legal entity that the home resides in. The MLS is not always accurate with sort of information.
If you have any questions at all about comparing lenders, rate quotes or anything else mortgage related please schedule a call with me.