Shopping for a mortgage lender can be one of the biggest decisions you will make in the homebuying process. You will likely have your home mortgage for 15 + years, so it is important to choose a lender that you are comfortable with and that best fits your needs. Here, we’ve outlined 8 important steps to take in finding the best mortgage lender for you.
1. Know Your Credit
Before you even start searching and comparing lenders, it is important to understand your own credit score and report. You can request your credit report once per year from each of the three credit bureaus: Equifax, Experian, and Trans Union. Check your credit score and make sure it is in good standing for the type of loan you want. Depending on the loan type you’re after, there are minimum score requirements that you must meet.
Find out if there are any discrepancies or negative marks on your credit report you should take care of, or if you can improve your credit score before shopping for a new lender. You may be able to secure one of the bad credit loans to help pay off some other debt. Paying bills on time and paying down credit card debt are simple acts that should offer a steady credit score increase.
- Create a Budget
If you don’t already have a solid budget in place, take a look at all your sources of income, bills, and expenses and create a workable budget. You should know what you can reasonably afford for monthly housing costs, as well as how much you have for a down payment and other moving costs before speaking with a mortgage lender. Knowing what you can afford will keep you from overstretching your budget and buying a home that you struggle to pay for later.
- Know the Types of Mortgage Lenders
There are several types of mortgage lenders, so do a little research to find out where to start and what might be best for you. You may already know about the big corporate banks, but there are also credit unions and portfolio lenders, as well as wholesale lenders and direct lenders that can all handle mortgages. A mortgage broker can handle all of your paperwork and can work with several different mortgage lending options, providing you with several personalized choices. Look into all the options available in your area and decide which types would best fit your needs.
- Learn About the Types of Loans Available
Several types of home loans are available, and you should know which ones may be the best for your situation. Conventional home loans can be the best general option, but have a higher minimum credit score requirement, and 20% down payment. A 203k loan can give you a mortgage plus an additional $35,000 beyond the home value, if you are interested in remodeling or purchasing and working on a fixer-upper. FHA loans are a great option for first-time homebuyers, with a lower credit score threshold (usually 580) and a much lower down payment option of 3.5%. For veterans, a VA loan requires no down payment at all, and no mortgage insurance.
- Understand the Current Housing and Mortgage Markets
This spring, Freddie Mac predicts some movement in the housing market, nationally. Lower mortgage rates and a large inventory of available homes both contribute to a more active housing market. Finding out more specific info about the markets in your city, and even your neighborhood, can give you even better insights, and help you make informed decisions.
6. Shop Around and Compare Rates
Talk to a minimum of 3 mortgage lenders and get quote estimates from each. Find out interest rates, closing costs, and additional fees so that you can compare and find the best option for you.
- Get a Pre-Approval
Once you’ve shopped around for lenders, obtain a pre-approval letter from your lender. This is an essential step in the homebuying process and will show home sellers that you are serious and capable of buying. Sometimes, realtors will only show homes if you have your pre-approval letter.
- Read the Fine Print
Mortgage offers may not be entertaining to read, but go through everything and make sure you understand them fully. If you see anything that seems wrong or that you don’t understand, do some research or ask your lender questions. You should also scan through for any errors – catching a wrong address or misspelled name can save you a paperwork headache later.
Seattle Mortgage Lender
In the Seattle mortgage market, Sammamish Mortgage is your go-to Seattle Mortgage Lender. Since 1992, our family-owned company has been the best-rated mortgage lender in Bellevue and Seattle. We know the Seattle housing market and can help you get into the home of your dreams. If you’re looking for the best Seattle mortgage lender, contact us today.