You're shopping for a mortgage and you're overwhelmed with the choices. How do you choose? The first factor most people consider is the interest rate and other costs, but that's only the beginning. You'll also want to think about the lenders themselves, not simply the numbers they're tossing your way. Here are five steps to follow when determining which lender is right for you:
1. Compare fees as well as interest rates. Comparing loans based on their annual percentage rate (APR) is a good place to start, but it's not enough. In the case of a mortgage, to get a more accurate breakdown of costs, ask the various lenders for a formal "good faith estimate" of all the fees you'll incur with your loan -- this is a standard form lenders must provide you that is more detailed than the overview you'll get with an offer. You're not just comparing numbers here: determine how honest and upfront you feel the lender is being, and don't use a lender that you feel is evading your questions.
2. Consider your individual circumstances. Bigger lenders aren't necessarily better than smaller ones, especially if you have unusual circumstances. For example, some lenders specialize in loans for people with poor credit, while others may have more options for those with small down payments. If you have special borrowing needs, look for a lender with experience working with people in similar situations.
3. Look at the range of loan types available. There are more loan options available than ever before, so take advantage of all that choice. Look for a lender who offers a wide variety of loan types, from conventional fixed-rate and adjustable-rate to newer ones such as hybrid ARMs and option ARMs. Your lender should be able to match you with a mortgage that's right for your financial situation and risk tolerance.
4. Evaluate the level of customer service. When you're comparing offers, ask each lender about their policy regarding locking in their quoted rates and see whether there is a fee. You're looking for flexibility and responsiveness. And also note how well they listen to you. If you ask for a 30-year fixed-rate mortgage, they ought to present that as an option, not push you toward something different. If you're not getting good service from a lender who is competing for your business, you're not likely to get it after you've agreed to work with them.
5. Check out the lender's reputation. Word of mouth is important in every business, including the loan market. If you've never worked with a particular lender, you'll want to find out the opinion of people who have.
The Butler Team
Tina & Mike Butler