When shopping for a mortgage, the mortgage lender can be an essential driver in the decision making process. Home loans are available from several types of mortgage lenders including: thrift institutions, commercial banks, mortgage companies, and credit unions. The prices and additional costs from different mortgage lenders so you should contact several mortgage lenders to make sure you’re getting the best price. Alternative options are also available from specialty mortgage lenders such as bad credit mortgage lenders, wholesale mortgage lenders and private mortgage lenders.
Mortgage Brokers also can assist you with the search for a home mortgage. Mortgage Brokers arrange transactions rather than lending money directly; in other words, they find a lender for you. A broker’s access to multiple mortgage lenders can mean a wider selection of loan products and terms. Brokers will generally contact several mortgage lenders regarding your application and will work to find you the “best deal” if they are contracted as your agent.
Some financial institutions operate as both mortgage lenders and mortgage brokers. Therefore, be sure to ask whether a broker is involved. This information is important because brokers are usually paid a fee for their services that may be separate from and in addition to the mortgage lender’s origination or other fees. Be prepared to negotiate with the mortgage lenders and the brokers for fees and compensation.
Prior to contacting mortgage lenders prepare your information. It is important to know how much of a down payment you can afford, and all the costs involved in the loan and mortgage rates. Knowing just the amount of the monthly payment or the interest rate is not enough. Ask for information about the same loan amount, loan term, and type of loan so that you can compare the information. The following information is important to get from each lender and broker:
Rates
Each mortgage lender and mortgage broker may vary in their rates; ask each for
a list of its current mortgage interest rates and whether the rates being quoted
are the lowest for that day or week. Be sure to determine for each mortgage
lender whether the rate is fixed or adjustable. Keep in mind that when interest
rates for adjustable-rate loans go up, generally so does the monthly payment.
Ask each mortgage lender about the loan’s annual percentage rate (APR).
The APR takes into account not only the interest rate but also points, broker
fees, and certain other credit charges that you may be required to pay, expressed
as a yearly rate.
Points
Points are fees paid to the mortgage lender or broker for the loan and are often
linked to the interest rate; usually the more points you pay, the lower the
rate. Ask the mortgage lender to provide points quoted to you as a dollar amount
rather than just as the number of points; to better determine how much the total
charge will be.
Fees
A home loan often involves many fees, such as loan origination or underwriting
fees, broker fees, and transaction, settlement, and closing costs. Many of these
fees are negotiable. "No cost" mortgage loans are sometimes available,
but they usually involve higher rates from the mortgage lender.
Down Payments and Private Mortgage Insurance
Some mortgage lenders require 20 percent of the home’s purchase price
as a down payment. However, many mortgage lenders now offer loans that require
less than 20 percent down--sometimes as little as 5 percent on conventional
loans.
Once you know what each mortgage lender has to offer, negotiate for the best
deal that you can. On any given day, mortgage lenders and brokers may offer
different prices for the same loan terms to different consumers, even if those
consumers have the same loan qualifications.