If you are buying a new home then it is always a good idea to deal with the best mortgage lenders. It can be tough getting a mortgage but finding a good mortgage lender is not difficult when you know how.
Why do you want to deal with the best mortgage lenders? Well a mortgage is a big decision and one that you will have to live with for many years. There are many mortgage lenders out there but some are just better than others. It is essential that you trust your mortgage lender as you may need to communicate with them during the term of your mortgage.
So use the following 5 ways to find the best mortgage lenders:
1. Start by Figuring Out what Mortgage you can afford
The first step to finding the best mortgage lenders is to know what mortgage you can afford. You can best achieve this by creating a budget which will include your income and your expenses.
When you are applying for a mortgage, potential lenders will want to know what percentage of your income your home loan will represent. They normally want to see that your mortgage repayments are less than 28% of your income. They will also want to see your debt to income ration being at no more than 36%.
The figures above are not a hard and fast rule but provide a safe parameter for you to work with. Some mortgage lenders will accept you if you have a slightly higher debt to income ratio of 36% so don’t worry too much if you are just above this level.
What is far more important is your credit score. If you want to work with the best mortgage lenders then your credit score needs to be as high as possible. This will also help you to obtain a lower interest rate for your mortgage.
2. Find the Best Mortgage Lenders by Identifying your Borrower Type
Some mortgage lenders specialize in working with different kinds of borrowers. If you are a first time borrower then there will be a range of lenders that are best for this. If you have issues with your credit or have had a foreclosure or bankruptcy then other lenders can help. The same goes for people in the military and self employed people.
The United States government has a number of programs to help specific types of borrowers. If this is your first mortgage then check out the home loans offered through the Federal Housing Administration (FHA). The Department of Veterans Affairs has programs to assist military personnel and veterans.
3. Finding the Best Mortgage Lenders by Comparing Loan offers
A lot of people do not compare offers when they are looking for a mortgage. They will do this if they are buying a car or a washing machine but when it comes to the largest purchase they are likely to make they just don’t do it.
You need to be prepared to compare mortgage offers to find the best mortgage lenders. You can do this online and will not take as much time as you might think. If you don’t compare mortgage offers then you can end up paying a lot more money than you need to. Even the smallest reduction in interest rates can save you thousands of dollars over the years.
We would always recommend that you compare at least three different mortgage offers. You need to compare the interest rates and also the repayment terms and any fees for setting up the mortgage. Some lenders will accept the payment of a fee upfront to reduce the interest rate on the mortgage.
You need to know every important detail about the mortgage offers you are comparing. Don’t just stop at three offers if you have time to compare more. Find several different lenders and get pre-approved by them and scrutinize their mortgage offers.
4. Understand the Jargon and the difference between Rates and APR
It will be a lot easier to find the best mortgage lenders if you understand the jargon used by these companies. Did you know that there is a difference between annual percentage rates (APR) and interest rates? Well there is and it is easy to get confused over these percentages if you don’t fully understand them.
There are usually additional costs included in the calculation of the APR. These costs include different financial charges such as points, closing costs and broker fees added on top of the interest rates. This means that the APR percentage will usually be higher than the interest rates.
5. You will feel at ease with the Best Mortgage Lenders
It is very important that you are comfortable with your mortgage lender. You should be able to ask them any questions and they should be willing to provide you with answers. When you are comparing different lenders prepare a list of questions and ask them of each lender. How did they respond to these questions?
Find out how the process works for issuing a mortgage with each lender. Ask them about all of the costs so that there are no “hidden” costs surprises. Find out how long the mortgage approval process takes and whether there are any penalties for settling your mortgage account earlier than the agreed term.
Just walk away if you feel pressured by any of these lenders. Just because they have approved you for a mortgage doesn’t mean that you can’t take your business elsewhere. You should always have a choice of more than one mortgage lender whatever your circumstances.
Now it’s time to find the Best Mortgage Lenders
Now you know the ways to find the best mortgage lenders it is time for you to take action and start looking for your ideal lender. The faster you find them the faster you can buy your dream home.