Whether purchasing a home or refinancing, your mortgage is probably one of the biggest investments you'll ever make. How do you know you're getting the best deal? Are all lenders the same? Here are a few shopping tips I share with my customers:
1. Work with a lender who gives you the option to pay points (or not).
Points are sometimes paid to buy a lower interest rate. (We'll talk more about that later!) Sometimes it makes sense to pay points. And sometimes it doesn't. Work with a lender who gives you a choice.
2. Interest rate isn't everything!
For most loan types, different lenders will have similar interest rates. Individual banks and mortgage companies don't determine interest rates. The secondary market does. You're not doing yourself any favors by choosing a slightly lower interest rate, if your lender won't return your phone calls and can't get your loan closed on time!
3. Trust your real estate agent.
If you're already working with a real estate professional, ask who he/she would recommend. Don't ask for the same three names they hand to every customer. Who do they know personally? Who have they successfully worked with in the past? Who would they really recommend?
4. Beware the absent lender.
As a local lender, I have a vested interest in providing exceptional customer service. Why? Because I want to work with you and your REALTOR in the future. And I know you'll be recommending my services (or not!!) to your friends and family in this community! An out-of-state lender doesn't have that motivation. He may never see you or your real estate agent again.
Local lenders also use local appraisers. Every area has its geographic nuances. As locals, we know the difference between Paradise Bay and Dungeness Bay; between the Elwha and the Duckabush. Will an appraiser from Tacoma have that knowledge?
5. Experience counts.
Mortgage lending guidelines are extremely complex and constantly changing. And there is a tremendous amount that you simply learn-as-you-go in this industry. There are no college classes or mortgage trade schools to teach someone the business. We all just have to figure it out along the way! Make sure your loan officer has the experience and aptitude to do the job well.
6. Consider logistics.
How will you exchange documentation with your mortgage rep? Are you comfortable faxing or emailing paperwork? Or would you prefer to physically deliver items to their office?
7. Ask your lender how long it will take to close your loan.
The last thing you want is to negotiate a 30-day close, only to find out your lending institution can't deliver! Often, the larger the institution, the less nimble they are to respond to changes in demand, and the longer it takes to close loans.
8. What happens after closing?
Does the bank or mortgage company intend to sell your loan or retain the servicing in-house? Just because your loan is originated with a bank, doesn't mean the bank will keep it. Some banks (especially smaller banks or credit unions) actually act as mortgage brokers. They don't service any of their loans. So consider who you'll have to call if you have a question or a problem with your loan two years from now - an individual with whom you already have a relationship or a customer service representative at an 800-number?
9. Don't be afraid to negotiate.
Really want to work with Acme Mortgages but think you could get a better deal at Loans-R-Us? Get a written estimate from the competition, and see if Acme can beat it.
10. Trust your instinct.
Ultimately, trust your gut. Who gives you that warm fuzzy feeling? Who do you think you'll communicate best with? Who do you want to work with?