| Choosing a mortgage lender is
as important as choosing your new home. In fact, choosing a lender is
the first thing you should do even before looking for your new home. The
loan officer and the company he or she represents has the responsibility
of not only gathering necessary information for loan approval, but in
helping you choose the right mortgage program, and in making the process
as hassle free as possible.
All too often borrowers make a quick decision based solely on who quotes the
lowest rate. Interest rates vary by the minute with different rates for
different programs. Some lenders, for marketing reasons, quote a lower rate and
supplement that rate with additional fees and charges. You need to make sure the
lender is not lowering one fee while raising another or lowering the rate while
increasing the fees. Most borrowers find little difference in fees and rates
when dealing with reputable mortgage professionals.
What factors, other than interest rates, should you consider?
There are
many loan programs to choose from. The differences are not just limited to your
income or assets. The term of the mortgage, whether there’s a prepayment
penalty, or a balloon payment, are only a few of the factors you must considered
in choosing the program that best fits your needs. The lenders' job is to
explain the differences while analyzing your particular circumstances, so you
can make an informed decision.
What fees do they charge, and will they give you a printout showing those
fees? You should receive a printout called a "Good Faith Estimate"
which shows all the fees they charge, helps you evaluate the true costs of the
loan and provides you with accurate information while comparing lenders.
Can you lock in an interest rate when you apply for a loan? Some lenders
allow you to lock in a rate at application, and guarantee that rate for a
specific period of time. Others may not allow you to lock a rate until you have
formal loan approval, or not guarantee your rate until just before closing. The
length of your lock must give you sufficient time to close your loan at the rate
at which you were qualified.
Is the lender familiar with the area where the home is located? Some
lenders may have different requirements for different areas. Will the lender
accept homes in rural areas? Will they accept mountain properties? Do they
understand homes with well and septic systems? Local lenders understand the
unique characteristics of properties in their lending area.
Does the lender have in-house or local underwriting authority for government
sponsored loans? Government sponsored loan programs such as FHA (Federal
Housing Authority), VA (Veterans Administration) and RHCDS (Rural Housing and
Community Development Service) offer Veterans, first-time and low to moderate-
income home buyers, low down payment or no money down loans. Lenders with
in-house underwriting authorities for FHA and VA or function as approved lenders
for RHCDS ‘s Guaranteed Loan Program, have experience processing, underwriting
and most importantly closing these type of loans. These loans feature low down
payments, few if any points, and are regulated to protect the homebuyer from
excessive fees. Contacting a lender that can explain these loan programs could
make home ownership more available to many homebuyers, a brief description
follows.
FHA – a government-insured mortgage used to purchase a home with a
down
payments of 3%. Income qualifications are more relaxed than conventional
loans. Typical local loan limits are $144,336.00.
VA – a loan offered to veterans and their spouses, active duty
personnel or reservist. These loans require no down payment. A certificate of
eligibility from the Department of Veterans Affairs is required. Your lender can
provide the needed request forms.
FmHA / RHCDS – no down payment loans for low to moderate-income families to
purchase rural property (most of our local city properties are eligible).
Closing cost can also be included if appraised value warrants.
After you have chosen the lender, even before you’ve decided on a specific
property, you should start the loan process. Being pre-qualified for a mortgage
has many advantages. By being pre-approved, you’ll be looking at homes that
you and your Realtor® know you can afford. This
demonstrates your ability to purchase a home and gives a stronger position while
negotiating with a seller. Spending weeks or even months with your Realtor®
looking for just the right home, only finding out that you can’t qualify for
the necessary loan amount. This problem could have been avoided by visiting a
mortgage professional early in the process. Also, it gives you the opportunity
to solve problems that may occur during the processing of your loan without
delaying the closing.
Buying a home is an important decision and one that most people will make
only a few times in their lifetime. Taking the time to make sure you choose the
right lender and the right mortgage program are equally important. When you make
the right choices, the entire process of buying and financing a new home can be
a pleasurable and rewarding experience.
By: Robert K. Leu. Bob is President of First Mortgage
Corporation, a Mortgage Banking firm with offices serving Western Colorado and
Southeastern Utah.
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