Buying a Home December 10, 2019

How to Avoid Disappointment with Your Lender

Home buyers often do not realize how complex and competitive the lending process can be. For many (especially first-time buyers) there’s only a hazy idea of “the bank” approving or denying them a mortgage. Understandably, many consumers are not educated on how to shop for a loan or that investing a little time upfront can result in profound savings, and a sense of satisfaction instead of disappointment.

Articles are popping up, statistics are rolling in, and we are finding that homebuyers are regretting their mortgage. According to the Wall Street Journal, “in a recent survey, 21% of home buyers regretted their choice of lender,” and for first-time home buyers, 27% regretted their choice of lender (The Wall Street Journal). Another article states that after a survey from Zillow, it was reported that “17% of young homebuyers regret their purchase” and that “more than a fourth have regrets about their mortgage, saying they rushed through the process” (The OCR) .  .  . We want to help you avoid this disappointment.

How to Look for a Lender

Nerd Wallet has provided a short article that helps you hunt for the best mortgage lender. Here are five tips they suggested:

Get your credit score in shape: The lower the credit score, the higher interest rate on your loan. Elevate your credit score by paying off paying off high-interest debts and lower your overall debt. Also double-check to make sure your credit report is accurate and error free.

Know the mortgage lending landscape: Understand the common types of home lenders, such as: credit unions, mortgage bankers, correspondent lenders, saving and loans, and mutual saving banks.

Get preapproved: By getting a mortgage preapproval, you will have an edge when bidding against other buyers.

Compare rates from several lenders: Search the best mortgage rates online. Once you have several quotes, compare the costs, and you can use your research to negotiate for the best mortgage rate.

Ask the right questions: After you have compared rates, ask for referrals from friends, family members, and look up online reviews and independent rating agencies to learn about the lenders merit. Then when it’s time to meet, ask questions such as:

  • What is their method of communication?
  • How long does their preapproval, appraisal, and closing take?
  • What lender fees are there?
  • What are the down payment requirements?

Warning Signs of a Predatory Lender

  1. Big Fees
  2. Penalties for Paying Off Early
  3. Inflated Interest Rates from Brokers
  4. Steering and Targeting
  5. Adjustable Interest Rates That “Explode”
  6. Promises to Fix Problems with Future Refinances
  7. Repeated Refinances That Drain You
  8. Not Counting Taxes and Insurance

For more information on each of these warning signs, refer to Responsible Lending’s article on this topic.

Looking for a mortgage broker to help you navigate the lending process? I’m happy to refer a few. Get in touch today!

Christina Chintis