How to choose a mortgage lender

Before homebuyers can decide what kind of mortgage they want, they need to decide what kind of lender they want.

Borrowers today face a dizzying range of mortgage lenders: A bank like

Wells Fargo

or a non-bank lender like Quicken Loans? A mortgage broker or a direct lender? An online application or a face-to-face experience?

With a recent JD Power survey With 21% of homebuyers expressing remorse over their choice of lender and 27% of first-time buyers regretting their choice, how can borrowers find the right lender for them?

Many giant borrowers seek mortgages from banks they already have a relationship with, either as private clients or through their business. This might be a wise choice given that banks often offer interest rate discounts or flexibility in other words to their best customers. But with the internet, it’s so easy to compare lenders, it’s tempting to shop around for rates online and submit an application to the lender with the lowest posted rate. According to experts, basing the decision solely on a posted rate may not be wise.

Speed, certainty and rate are all important, not just rate.

“All lenders offer something similar, which for most people is a 30-year fixed rate mortgage,” says Erin Lantz, vice president of mortgages for Seattle-based real estate site Zillow. “Still, there are differences that impact consumers, and it depends on what kind of level of service you get from these lenders.”

Some lenders are more responsive to their customers or can close a loan faster. It can make a vital difference in tight real estate markets, where giant mortgage seekers often compete with cash buyers. In that case, “don’t just settle for the price,” says Sanjiv Das, managing director of Caliber Home Loans, a Dallas-based direct lender. “Speed, certainty and rate are all important, not just rate.” Das suggests that borrowers ask their lender for the estimated closing time of their loan.

Giant Jungle Tips

Here are some points to consider:

• Check the license. The National Multi-State Licensing System provides a free website which allows consumers to check the license of financial service providers. The Consumer Financial Protection Bureau also has a website that allows you to search for complaints, as does the Better Business Bureau.

• Look for a specialized lender. Are you looking for a VA jumbo loan? Some lenders have more expertise than others when it comes to government loans. First-time home buyers, heavy borrowers, or those with bad credit may want to seek out lenders who have specific expertise in their situation.

• Consider your comfort zone. Would you rather sit down with a loan officer at your local bank branch or submit an application online? “It’s all tied to a lender you can trust,” says Zillow’s Ms. Lantz. “Shop around, talk to a few and find out how responsive they are. Will they be there for you when you need them on the 11th hour when you’re ready to close? »

Giant borrowers could benefit from working with a portfolio lender, in which mortgages are held on the lender’s books rather than sold in the secondary market. “We have the latitude to look at exceptions on things like debt-to-income or loan-to-value ratios, and we might identify compensating factors as to why we might be willing to do what appears to be a riskier loan,” says Scott Witherspoon, chief credit officer of Affinity Federal Credit Union, a portfolio lender in Basking Ridge, NJ. For example, an applicant’s low credit score can be offset by a substantial amount of cash in the bank or stock market, he says. However, a lender selling its loans might not have this flexibility.

Rather than working directly with a lender, some borrowers choose to work with a mortgage broker, who acts as a matchmaker to find the best deal from a lender. This could save borrowers time and money, since their application is submitted only once to the broker, who then compares the rates and terms of multiple lenders. But brokers are compensated for their services, and that compensation comes in the form of an origination fee paid by the borrower – often 1% of the mortgage amount – or a higher interest rate on the loan. “Like real estate brokers, they want to see the deal done, so you have to understand that their incentives are different than yours,” says David Reiss, a Brooklyn Law School professor who specializes in real estate.

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