Choosing a mortgage lender can seem a bit daunting. After all, there are so many of them out there. Community banks, savings and loan institutions, mortgage brokers, national banks, credit unions, and online lenders may all provide mortgage services. However, before you sign a document as important as a mortgage, consider the reputation of the institution and the terms of your contract.
Here are 6 questions you may want to ask any potential lender:
1. How Long Have You Offered Mortgage Loans?
The longevity of an institution may be a good indicator of how well its staff does its job and serves its clients. Working with an experienced team that fully understands the lending can help to secure a loan that fits your unique situation.
2. How Can I Reach You If I Have Questions?
You will want to choose a lender that is responsive to your needs. If a lender does not return calls, ignores emails, or seems impatient with questions, it could be a red flag. Your loan team should be accessible and should provide multiple ways for you to get in touch.
3. What is the Minimum Credit Score I Will Need to Qualify?
Ask what the lender’s minimum credit score is to qualify for a home loan. Lenders set their own acceptable rates and generally tie credit scores to the interest rates they will offer you. A higher credit score may make you eligible for a lower rate. Ask about their general policy before you begin the process.
Don’t know your credit score? Most credit card companies and many banks will provide a FICO credit score for free to their customers. You’re also entitled to obtain a free credit report from each of the credit agencies, Experian, TransUnion, and Equifax, once per year. To find out what your credit score is, inquire at annualcreditreport.com. Consider examining your reports from each of the three major credit agencies for any errors and try to address them before you apply for a mortgage.
4. What is the Debt-to-Income Ratio I Will Need?
The debt-to-income ratio refers to the amount of monthly principal, interest, taxes, and insurance (PITI) you will owe, plus your other expenses, divided by your monthly income. For example, if your PITI and expenses will be $2,000 per month and you earn $6,000 per month, your debt-to-income ratio is 33%. Many lenders want borrowers to have a debt to income ratio of 36% or less with 43% as a maximum, but it will vary by lender. If you are able, you may want reduce your ratio by lowering the requested loan amount and making a larger down payment.
5. What Are Your Interest Rates and How Many Points Will You Charge Me?
A low interest rate may not be the best deal if you also have to pay high mortgage points and other fees. Comparing interest rates against the Annual Percentage Rate may provide insight as to the full picture of the mortgage.
6. How Much are the Origination, Lending, and Other Fees?
Fees can vary by lender, so ask what the costs will be and then compare. Among the normal charges you might see are fees for a title search, survey, recording, and/or appraisal fees. The lender is required by law to provide the Loan Estimate within three days after you apply for a mortgage. It will also include an estimate of your monthly payment, the full closing costs, estimated costs for taxes and insurance, and details about how interest rates and payments might change over time.
Looking for a mortgage broker to help you find the best mortgage lender for you? Contact Mariner Finance* today to help you locate a local branch that can address your specific needs.
*Mariner Finance’s loan officers are licensed and regulated financial professionals who work to connect potential borrowers with mortgage lenders who best fit the borrower’s financial situation. Mariner Finance does not act as an originating lender for mortgage loans or the refinancing of mortgage loans.
