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How To Choose The Right Mortgage Lender

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Photo: Pick a lender who looks out for your best interests

Pick a lender who looks out for your best interests

Faced with sharply increasing apartment rents, more and more millennials are moving out of apartments and into homes. At the end of 2016, homebuying activity increased to its strongest level in nearly a decade, with first-time home buyers now comprising 32% of all purchase transactions according to the Wall Street Journal. Deciding which home is right for you is obviously an important decision, but since buying a home is the single largest investment for many households, it’s even more important to choose the right mortgage lender.

First and foremost, choose a lender who will look out for your best interests and not theirs. One of the reasons this is such a wise approach is that inadvertent mistakes can cost you real money. Here are some key tips to help you select the right lender:

  • Make the lending decision yours, not someone else’s. Remember that the choice of a lender is yours and yours only. As one example, many home buyers engage a realtor to help them with their home purchase, and especially first-time home buyers. Many realtors will recommend a mortgage lender they’ve worked with in the past. However, realtors should provide you with a list of at least three mortgage lenders to allow you to compare fees. Often times you can save significant amounts of money by shopping around and choosing another lender. While your realtor’s recommendation is certainly worthy of consideration, remember that you’re not required to use that lender.
  • Get preapproved at no cost. Getting preapproved by a lender is an important first step for all home buyers, not just first-time home buyers. It’s also a good time for you to get to know your mortgage lender and ask questions. Your lender should not charge you a fee to get preapproved. Also, when getting preapproved, make sure that your lender has your paperwork reviewed by a real underwriter and not just the Loan Officer.
  • Low closing costs are important - don’t fall for the “Interest Rate Trap”. Many mortgage lenders know that consumers will only look at their interest rate and not their closing costs to determine the best deal. As a result, many lenders set their interest rates slightly below market and increase their fees to make up for the difference. Don’t fall for the Interest Rate Trap!
  • Non-commissioned Loan Officers. No one likes to feel pressured when thousands of dollars of their hard-earned money at stake. For that reason, many people prefer to work with a non-commissioned Loan Officer, who may be more influenced by their own self-interest than yours.
  • Select a lender who won’t sell your loan. A large percentage of lenders will immediately sell your loan after your loan closes, and often times to a large “megabank”. Many home buyers, however, prefer to deal with the lender who closed their loan and thus prefer to have their loan serviced by the same lender. When talking with your Loan Officer, ask them if your loan is going to be sold and to whom. Don’t be afraid to walk away if their answer is a large megabank. The internet is flooded with thousands of horror stories of homeowners who felt they were treated like a 10-digit number by these large megabanks and received poor customer service, and sometimes worse.

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