The type of mortgage loan you qualify for is just as important as the mortgage lender you work with. The good news is it’s easy to find a mortgage lender. Due to the current boom in housing, lenders have ramped up their advertising to stay competitive.
Chances are if you’re shopping for a home, you’ve seen several ads with lenders advertising their low rates. And while rates are important, there’s more to consider when choosing a mortgage lender. Use these five tips to ensure you’re making the right choice:
1. Work On Your Credit Score
To find a qualified lender, you need a good credit score and a good debt-to-income ratio, which is the percentage of a consumer’s monthly gross income that goes to paying down debt. Before providing homeowners with a loan, lenders want to know they’re able to pay down charges in a timely manner.
According to the Consumer Financial Protection Bureau, 43% is the highest debt-to-income ratio a borrower should have to qualify for a mortgage. Before you start searching for a lender, check your credit score and debt-to-income ratio. If you’re not in good financial standing, try to make some improvements before taking the plunge into homeownership.
2. Make Sure You Can Afford The Mortgage
Getting approved for a loan is only part of the battle. The other part is making sure you’re financially stable enough to afford the monthly mortgage.
Lenders want to make sure you’re able to afford your mortgage. But the truth is, when lender’s pre-approve homebuyers, they don’t always take into account monthly payments. For example, grocery bills, car insurance, etc. That’s something you have to consider before applying and seeking mortgage pre-approval.
Once you have a good idea of your finances, you can look for mortgage lenders who can provide you with the right options and fees.
3. Understand The Different Types Of Lenders
Before choosing a mortgage lender, it’s important to understand your options. There are several different types of lenders, all of who offer their own benefits. For example, you could choose to work with a direct lender, mortgage broker, retail lender, etc. It depends on your goals and overall needs.
4. Seek Referrals & Ask Questions
Chances are, you know someone who’s purchased a home and worked with a mortgage lender. Ask them about their experience and whether they would recommend anyone specific.
Once you have a few options, do your own research. Reach out to your top picks and ask questions about the process, and whether they can provide a general timeline for when certain documentation will be due. And what you should expect throughout the process.
5. Pay Attention To Fees
Before you pick a mortgage lender, make sure you have a good understanding of their fees and where they can offer you potential assistance. For example, some lenders offer closing cost assistance programs and down payment assistance programs. If you’re a first-time homebuyer, you might also qualify for other programs.
When choosing a mortgage lender, it’s important to find someone who has your best interests at heart, and will work with you to save you money!