Finding the right mortgage lender

piles of cashWe’re certain you understand the importance of finding a good mortgage lender when purchasing your home. But how do you find and evaluate the pool of potential lenders? If you do Google search in your area, you’ll see the list is overwhelming. Here’s our list of key things to look for when shopping for a good lender.

1. Recommendations from friends/family or your agent

Personal referrals are always a good place to start. Ask your family and friends if they can recommend the lender they last used. You can also ask your real estate agent. Don’t worry that he might be getting a kickback or referral fee for the recommendation. It’s illegal. Your agent will know things like which lenders can find options for difficult scenarios and which lenders won’t leave you hanging at the closing table.

2. Look at the numbers

Once you’ve found some lenders to interview, look at the numbers. Lenders will provide a quote containing several lines items:

  • Interest rate. While this may vary slightly from lender to lender, be concerned if the rates varies more than 1/8th of a point or so. Too much variation could be a red flag.
  • Fees: All lenders charge fees for the loan. As we noted in our post on closing costs, some of these fees are negotiable, while others aren’t.
  • Points: Sometimes also called “discount points“, these are a form of pre-paid interest. One point equals one percent of the loan amount. As a borrower, you can offer to pay your lender points as a method to reduce the interest rate on the loan, thus obtaining a lower monthly payment in exchange for an up-front payment. For each point purchased, your loan rate is typically reduced by 1/8%.

3. Personal preferences

Once you’ve determined that the price is right, it comes down to the right “fit.” With which lender do you feel most comfortable and confident? What level of service will he provide? Will she be there at closing? How experienced is he at finding the right loan product for your unique situation? These are all questions you should ask before making a final decision.

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