Mortgage Lenders

Investing your hard-earned money in a property is a big decision. Bottom line – you don’t want to screw it up. Most folks don’t have the entirety of what a property is selling for to buy it. If that’s your case, then you’ll need an entity to loan you the money. This entity is a mortgage lender. Most properties require you to be invested over a long period. This is anywhere from 15 to 30 years. A mortgage lender underwrites your loan, and then sets guidelines to repay it. The interest rate, loan terms and repayment schedule will all be based on your creditworthiness. Creditworthiness is a calculation based the amount of debt you hold, the frequency in which you pay it, and whether you have missed any payments. You can improve your credit score; so don’t fret if you have bad credit or a poor credit score. Getting that score up is possible, but you’ll need to put in some financial work in doing so. There are four types of mortgage lenders to be aware of. The first are banks. Wells Fargo, Bank of America or Chase are some of the largest. Many times taking out a mortgage with the very bank you already have an active account with will result in more favorable terms. Banks, however, in general have the highest interest rates among all lenders. Second, due to the volume of loan applications they also take longer in processing new applications. The second type of mortgage lender is credit unions. Credit unions will invariably feature lower rates than banks, mainly because they’re non-profit institutions and as such are not seeking excessive profits. You’re likely thinking, “why would I go to a bank, then?” Well, not everyone can qualify to be a credit union client, and even if you get in, the number of loans available is miniscule compared to banks. The third type of mortgage lender is a “non-bank” lender. Businesses like Rocket Mortgage, Quicken Loans, Loans Depot or Guaranteed Rate fall into this category. These are financial firms that are not classified as banks and have more leeway in how they operate. And lastly, mortgage brokers. As opposed to mortgage lenders, brokers help borrowers identify the best lenders with the most competitive rates, but take a cut of the deal. They’re traditional middle entities, and while helpful will drive the overall borrowing cost up. The best way to go about looking for a lender is like looking for a car. You want to visit them, ask the relevant questions, get a quote and then compare. Freddie Mac came out with a study a couple years back and found that comparing across at least three lenders with their respective quotes could save you up to $1,500. If you bumped that number to five, you’d see an average of a $5,000 savings. See why shopping around is worth it? There are also sites that will allow you to enter your relevant information, and they’ll do the legwork for you. Granted, these charge, but if your time is more valuable than obtaining quotes lender by lender, it makes sense. We can’t stress enough how big a decision this is. Take your time, and check with your bank first. Then begin to compare with the different lending bodies, and you’re sure to uncover the best deal.