There is a huge misconception among homebuyers that the best lender is the one who offers a product with the lowest interest rate. Here is why this may not be the case:
Although we aren’t finance experts, our best advice is to shop by comparing each company’s APR. This is because this figure reflects the annual percentage rate with points and fees included. We’ll get deeper into this in a moment.
The best place to start when shopping for a mortgage lender is where you do your banking. Find out what kind of rates and products they offer, and use this to compare against other lenders.
Contacting a mortgage broker may be a good next step. These mortgage professionals do the shopping for you, from a broad array of loan products with various lenders.
When you call or visit lenders, look into the following aspects of their loan products:
If you won’t be using an FHA, USDA or VA loan, find out how much the lender requires as a down payment. Also ask if Private Mortgage Insurance (PMI) is required and, if so, how much the premium will increase your monthly mortgage payment.
As of August, 2015, the Good Faith Estimate (GFE) form that the lender is required to supply to a borrower has been replaced with the Loan Estimate and Closing Disclosure. This form still itemizes the loan’s terms and fees but it goes into more detail and is easier for consumers to understand than the old standardized forms.
The Closing Disclosure must be given to the borrower three days before closing.
Here’s what to expect during the mortgage process:
These are just the bare-bones steps in the process and no two applicants are the same; so your mortgage process may vary.
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