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65% of homeowners have a mortgage.
Mortgages give all prospective homeowners the financial means to purchase the home of their dreams.
Your first mortgage is a milestone and a decision that should not be taken lightly.
It’s important to thoroughly research loan lenders to ensure that you are getting the best rates for your financial situation.
Finding the best local lenders can be difficult, particularly if you are new to the world of mortgages. However, it is possible to find a lender easily by keeping the following considerations in mind.
Read on for insight!
1. Know Your Finances
A mortgage operates much like other consumer financing options. Its interest rate and terms will largely depend upon your financial history and credit score.
Prior to researching local lenders, familiarize yourself with the current state of your financial affairs. This will also be extremely helpful for the mortgage pre-approval process, which we recommend all first-time homebuyers undergo.
Getting preapproved for a mortgage enables homebuyers to move more quickly through the home purchase process. It can also make buyers competitive in situations where homes are in high demand.
The preapproval process requires applicants to demonstrate proof of income and assets, often in the form of pay stubs, tax documents, and bank statements. It also will require applicants to identify the total amount of loan they require, as well as how large of a down payment they will be able to offer.
Assessing your financial status can also help you identify a budget.
Purchasing a home for the first time can be an emotional process. As such, navigating a mortgage without a coherent budget in mind can sign you up for financial disaster down the road.
Know what your absolute reasonable maximum is for a home purchase price. Also, identify how much you will be able to contribute to a down payment.
Lastly, inspect a recent copy of your credit report. The easiest way to ensure a positive lender relationship and ideal interest rates is to boost your credit score. If your score is subpar, you may struggle to find a lender that will actually approve your application.
2. Understand Your Loan Options
Before browsing local lenders, understand your home loan options. No two mortgages are alike, and it’s essential to go into your lender search knowing which loan is ideal for your situation.
Most homeowners have a conventional mortgage, which is not insured by the federal government. Accordingly, they offer consumers more flexible lending terms, including lower down payments and good interest rates for borrowers with solid credit.
Conventional loans also enable borrowers who put down a 20% down payment to waive mortgage insurance, which can be costly. However, a minimum of a 3% down payment is required for conventional loans.
Other mortgage options include FHA loans, insured by the Federal Housing Administration, and VA loans, available for service members and veterans.
These government-insured loans have tighter requirements for applicants but can result in low-interest rates and down payments across the board.
If you have questions about which type of loan is right for you, start a conversation with us now.
3. Research Lenders
This tip often goes without saying. However, it’s important to take your time to assess the lending landscape. Many towns and cities have scores of local mortgage brokers, and all with offer different rates and experiences.
Begin your search by asking friends and family members for referrals. This is the best place to start when gathering local names. Also, confer with colleagues and employers.
It’s also possible to peruse online reviews of local lenders through review portals. Some mortgage lenders include client testimonials on their websites.
When researching lenders, prioritize the ones who offer the type of mortgage you require. But also look for lenders who have been serving the community for many years. Well-established, brick-and-mortar lenders are more likely to offer stellar customer service.
As you conduct your research, feel free to call lenders and ask a few initial questions. These starting conversations can be incredibly revealing about what you can expect the borrower-lender relationship to be.
4. Ask Essential Questions
Once you’ve built a list of viable lender options, meet with these lenders in person to discuss the preapproval process.
These consultations can give you further insight into the local loan lenders who will offer you the terms and support you need when buying your first home.
During your conversation, ask about the timeline for mortgage preapprovals. Inquire about the appraisal and closing processes, as well as any fees involved. A lot of homebuyers may have to pay lenders fees associated with applications, credit reports, and loan origination.
Also, ask about how lenders communicate with their clients. Prioritize lenders who place a premium on communication with their borrowers and provide information through a variety of channels.
Inquire about down payment considerations, private mortgage insurance, and any other recommendations the lender has for the preapproval process.
5. Compare Rates
It can be tempting to jump on the first loan approval you receive, particularly if the rates are in line with your expectations. However, it’s essential to compare rates and terms of multiple local lenders.
Rates do vary from lender to lender. This is because some lenders include certain fees, while others don’t. It’s also possible to sign up for a mortgage that rolls various fees into the loan total, which can impact interest rates offered.
We recommend gathering at least three rates from three distinct lenders.
Select the lender that offers the best terms on all fronts, including customer service, engagement, and rates.
How to Find the Best Local Lenders
Navigating your first mortgage can be overwhelming. Staying informed throughout the process, however, can ensure that you end up with the best mortgage for your needs.
Understand your financial footing before researching local lenders. If possible, boost your credit score to guarantee more competitive rates.
Talk to family and friends to get lender recommendations. Build a list of lenders who offer the type of home loan you seek and ask plenty of questions in consultations to narrow this list further.
All in all, comparing rates can help you choose the mortgage broker ideal for your situation.
At Metropolitan Mortgage Corporation, we love being a part of every individual’s journey on their path to home ownership. If you’re ready to apply for your home loan, get started today!