By Joe Szabo, Scottsdale Real Estate Team
Buying a home is the largest purchase many consumers will ever make, and many will turn to a lender for financing. But finding a lender you click with can be a challenge, especially if you wait until the last minute.
Li-Ning Huang, a research manager on Fannie Mae’s economic and strategic research team, says buyers should start talking to lenders early in the process — before you fall in love with a home — and compare several quotes. “Otherwise, you could end up choosing a lender based on convenience,” she says.
Avoid buyer’s remorse
Twenty-one percent of home buyers reported buyer’s remorse over their lender, according to a recent J.D. Power study. Among first-time home buyers, that rose to 27 percent. Dissatisfied respondents cited a lack of communication, unmet promises, and feeling pressured to select a specific mortgage product. “If you’re not getting a call back, or don’t understand what’s going on, look elsewhere,” advises Angie Hicks, founder of Angie’s List. Last year, about 9 percent of the real estate pros received C, D, or F grades from Angie’s List members. “People happy with their mortgage pros cited quick, friendly, clear responses and fair pricing,” says Hicks. “There are plenty of qualified, trustworthy lenders out there.”Find the right lender
It’s important to find a lender or broker who communicates well with you, and in a manner you’re comfortable with. This applies whether you’re meeting face-to-face with a lender, or working online and over the phone. Does the lender explain things well? Are they willing to spend the time? Or do they seem rushed and irritated? To test the waters, Hicks suggests asking these five open-ended questions:- Is this the right time for me to buy? The lender’s answer will depend on your circumstances — such as your debt-to-income ratio, how much you plan to put down, and other factors. What’s important is that they explain your situation in a way you understand.
- What personal debts — like credit cards — should I pay down before closing? And how soon do I need to do that to qualify for a good rate? Lenders should explain what they’re looking for in your credit history and how you might improve your credit score. According to credit reporting agency Experian, on a scale ranging from 300-850, a credit score of 700 or above is generally considered good. A score of 800 or above is considered excellent. If you aren’t sure what to expect, you can order your free credit report online.
- Should I pay points to lower my interest rate? Your interest rate may be paired with mortgage discount points. One discount point typically amounts to 1 percent of the loan amount. So one point on a $250,000 mortgage would equal $2,500. A lender should explain the options. “The longer you plan on living in your home, the more sense it may make to pay points,” advises the Consumer Financial Protection Bureau.
- How much will I need to pay at closing? Do I pay by check, wire transfer, or bank check? Make sure you really understand how the money will be transferred when the deal closes. There’s been an uptick in scammers swiping the buyer’s closing funds during electronic transfers, according to the Federal Trade Commission.
- Who will service my loan? A servicer is the company that collects your mortgage payments and deals with late or missed payments. Some lenders service their own mortgages or outsource servicing. Others might sell the mortgage. While you have no say on who services your loan, this question gives lenders the opportunity to talk about the scope of their business and commitment to you.
