Selecting a good mortgage lender is a task that requires diligence and clarity of thought to avoid buying an expensive home loan that could cripple you financially. Some of the key things you need to consider when choosing a mortgage lender include:
Lender Background Checks
Although this may seem like an expensive undertaking that may require you to hire a private investigator, it is actually an easy and cheap task if you know where to look for information. A good point to begin the background search would be the National Mortgage Licensing System & Registry (NMLS) website. This site is a treasure trove of information on virtually all registered and state-regulated mortgage companies in California and across the US as well. What’s more, you would not need to pay anything to access the NMLS database. In other words, you would only require an Internet-enabled device and data from your carrier of choice to access the database. Besides the NMLS database, you can also get valuable information by visiting lender’s sites, visiting real estate forums, as well as from friends, close family members/relatives and colleagues.
Small versus Large Lender
You can get a home loan from a small or large lender. Nevertheless, determining whether to go for a small or large lender depends on factors such as a borrower’s risk profile (low, mid, or high FICO score), prior financial relationship with financier, lender’s mortgage offerings, property cost, and the competence/expertise/experience of the loan officer involved. Traditionally, large lenders have been the financiers of choice for new and repeat homebuyers. However, you should include small lenders in your list of potential financiers because the mortgage landscape has changed significantly in the last few years. More specifically, according to data from Inside Mortgage Finance, small lenders now account for 60% of the entire US mortgage origination market. In comparison, they were responsible for just 39% of the same industry metric in 2009. This is because they tend to have less stringent mortgage application criteria, little/less-taxing bureaucratic red tape, fairly relaxed underwriting standards and have benefited from rules aimed at ensuring low-income earners can buy homes instituted by the government in 2013.
Good Faith Estimate
Request the lenders in your shortlist to give you their good faith estimates. At this point, it is worth noting that a good faith estimate is a legal requirement a lender must give a borrower. This estimate should contain information on taxes, interest rates, attorney fees, closing costs, title insurance, credit check costs, and property insurance rates. In general, expect actual information contained in a good faith estimate to vary slightly from one lender to another. Compare data in all the estimates received and then select lender whom you feel suits your home-buying needs, financial situation, and long-term mortgage payments relationship.
Conclusion
Buying a home is one of the most important financial undertakings in most people’s lives. This means you have to choose lender wisely to avoid incurring unnecessary home closing costs or higher-than-average monthly payments for homeowners in same category. To choose the best mortgage lender, carry out thorough background checks, determine viability of choosing a small or large lender and compare good faith estimates from several mortgage companies in California.
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