The most important step in the home buying process, if you aren’t paying cash, is securing a loan. You’ll need to shop for a lender, compare loan products, and get that all-important loan preapproval letter.
Today we’ll take a look at how to go about choosing a lender.
Myth number 1
The biggest myth among homebuyers is that the lender with the lowest interest rate is the best lender. Here is why this may not be the case:
Jumping online or on the telephone to find lenders with the lowest rates, then, isn’t a smart first move. Start with the mortgage department of whichever bank or credit handles your personal banking. Ask about the APR; this figure includes not only the annual percentage rate on the loan but the points and fees as well.
Then, contact a mortgage broker for the same information and compare the two quotes.
What else to look for
When you call or visit lenders, look into the following aspects of their loan products:
If you’re going after a conventional loan, ask how much you’ll be required to pay as a down payment and, if private mortgage insurance is required, how much the monthly premium will be.
The lender is required to supply you with a Loan Estimate form within three days of applying for a mortgage. This form itemizes the loan’s terms and fees and, since all lenders use the same form, it is a handy way to compare loans between lenders.