Whether you're ready to buy a home, or you're looking to refinance your current mortgage, it's important to remember that a great interest rate does not always mean you've got a great mortgage lender or the most cost-effective option. There is so much more to consider and question when you're shopping for your home loan.
A Great Lender ...
1. Gives All the Facts and Then Some, Up Front While a low-interest rate is ideal, rate alone is not an indicator of the overall financial obligation. The loan term, closing costs, and type of loan (fixed or adjustable) must all be factored in to gain a true picture of what you'll spend just to get the keys, and then what you'll pay monthly.
Lenders are legally required to provide a Loan Estimate within three days of your application date, but it's good to ask when you can expect this document. A top-notch lender will be expedient with the Loan Estimate and will take it several steps further to provide a personalized look at your total financial obligation. Anyone looking to earn your business should explain all your options to your satisfaction and provide comparisons of different loan products to help you come to a decision.
Ask if the lender provides a complimentary Total Cost Analysis. After reviewing your current financial situation, the lender should offer you side-by-side chart comparisons of your options, costs, and savings, all personalized to your unique needs. You can use this information to make confident, informed decisions.
2. Services Your Loan You may love your mortgage lender, particularly if that person is diligent about finding you the best loan options. Once you sign on the dotted line, you (and your mortgage) may be handed off to another company to service your loan, and they may not offer the service you expect. The mortgage service provider sends you your mortgage statements, manages your escrow account (if you have one), and responds to your questions. From there, your loan servicing could be sold again and again, and you'll be at the mercy of whoever services it. Besides the inconvenience of changing your payments each time the servicing is sold, you most likely be working with a large mortgage servicer that's out of state and offers limited accessibility options. Ask your lender if they plan on selling your mortgage loan servicing.
The Better Business Bureau (BBB) and the Consumer Financial Protection Bureau (CFPB) consumer complaint websites are good places to learn about challenges other applicants have experienced with a lender you're considering. The tough part is, if you find out after the fact, there isn't much you can do unless you're willing to refinance with another lender. It's best to do your research ahead of time so you can work with a lender you trust.
3. Offers Access the Way You Want Some of the largest, most well-known lenders offer limited ways to interact with them. So if there is an issue with your home loan, you might be frustrated with a mortgage provider that only allows online or phone communication. You want a lender that's responsive — regular communication with you throughout the process and offers a variety of ways to get in touch – including the option to meet in-person at a local, physical location.
4. Closes On-Time This seems like a given: your loan should close when the lender says it will. However, it could surprise you how often closings are delayed as a result of inaccuracies in the loan documents, a shortage of staff to move paperwork through the underwriting chain, or a last-minute change that means starting all over with waiting periods and paperwork signing. While a refinance or home equity loan has less time sensitivity, home purchases are tied to an escrow close date. If the lender can't meet the deadline, it could set up a chain reaction of delays, and worst case, cause you to fall out of escrow altogether. It's important to work with a lender that understands the value of your time and will work diligently to make things happen when they say they will.