The mortgage lender you choose could very well be the most important decision you make in the homebuying process. You’ll be dealing with them for the next 20 or 30 years, so it’s best to shop around to find the right one. Of course, with so many of them out there, this isn’t always an easy task. But that doesn’t mean you shouldn’t take the time to do so. Following these guidelines should help you with your search.
Know your credit score
The higher your credit score, the more choices you’ll have between lenders and terms, so it’s important to know where you stand. Start by getting your credit reports from all three bureaus — TransUnion, Equifax, and Experian. (You’re legally entitled to one free report each year from each of the bureaus.) Then, look over them well to make sure that no errors need to be corrected. This happens more often than you think. According to the Federal Trade Commission, 1 in 4 consumers have at least one error on their report affecting their credit. This could include a mistakenly reported late payment, an account that doesn’t belong to you, or outdated information. If you do find mistakes, it’s important to dispute them to the bureaus right away. You can do this online through the reporting bureaus or by mail with written letters. Either way, follow up to make sure they get removed or keep contacting them until they do.
If you don’t find mistakes, but still feel your credit is a little lower than you’d like, it might be a good idea to work on raising your score before applying for a mortgage. This could mean opening another line of credit to increase your credit utilization score or paying your bills on time for a year so that you have a better payment history.
Talk to more than one lender
Don’t settle for the first mortgage company you find unless you truly feel you’ve found the best one for you. Talk to two or three and ask them all the right questions. You’ll want to know what their down payment requirements will be, how they communicate with their customers, and time frames for closing their sales. Treat the process like a job interview and go with the company you feel most comfortable with that can offer you the best terms.
Know your options
Knowing your various options for lenders will set you up for success long before you start shopping for a lender. You can go through mortgage lenders who loan you the money directly for your house. Or you may be talking to a mortgage broker who actually matches potential borrowers with lenders that fit certain profiles. There are also portfolio, wholesale, correspondent, and retail lenders that all operate a little differently. Find out which type of lender you’re talking to and the various benefits and shortcomings of each one. It could save you frustration throughout the process because you’ll better understand what to expect.
Before you ever apply for a mortgage, you can search for the best rates online. Of course, you’ll need to keep in mind that these are just estimates that can be affected by many factors. For example, other states’ mortgage rates will vary from mortgage rates in kansas. Also, your credit score and financial situation could make a difference in the rate you get. But looking at the ranges the different companies offer can still give you a good idea of where you’ll find the best rates overall.