When house hunting, you may come across homes at prices that seem too good to be true. These homes are often selling for dirt cheap due to foreclosure. There are many reasons people default on a conventional mortgage. The media often focuses on poor financial habits, losing a job or even the recession. However, choosing the wrong mortgage lender plays a role as well.
The lender you decide to work with is especially important when choosing an adjustable rate mortgage. These loans have fluctuating interest rates that reflect the current market. However, some lenders limit how low the interest can dip to, causing you to miss out on low rates. They then set a high ceiling for when rates are high, which causes your monthly payments to skyrocket.
The right lender makes the process of financing a home as smooth a process as possible with fair and mutually beneficial terms. Here’s how to ensure you make the right choice.
1. Offline Referrals
If you have family and friends who already bought a home, they may recommend their lender. Your real estate agent may also try to steer you into the direction of their own lender. No matter how much that agent talks up the lender, understand that they may only do so to get a commission on your loan. Focus more on what everyday borrowers have to say about working with that lender, including not just rates but the customer service.
2. Online Reviews
Sometimes you don’t know anyone who has used the lender you have in mind. A great way to get additional information is to check them out online. The company website will have their own glowing reviews about their amazing service. No bank is going to tell on itself. Instead, check its reviews on Facebook, Google or any other service that lets consumers provide honest ratings. Look out for recurring problems and how the lender responds to negative feedback.
3. Turnaround Time
Don’t get mesmerized by banks that claim to have very quick turnarounds. Sometimes a long turnaround time on a loan isn’t a bad thing. Do you need to sell your home or move across the country? That takes time. On the other hand, if you’re buying in a competitive market or come across a once-in-a-lifetime deal, you may need to act quickly. Choose a compatible lender for your needs.
4. Personal Finances
It’s also worth remembering that your financial situation helps to determine what bank you can work with. NerdWallet points out that income and credit score help banks to evaluate your ability to repay the loan. If you have a high income and credit score, your options are endless. However, if you have a low income and poor credit score, an FHA or USDA loan may better suit your needs. Note that not all lenders offer all these types of loans.
5. Mortgage Terms
After determining the type of mortgage you need, it’s also important to revisit the terms. Most — if not all — lenders offer fixed rate mortgages. Some may not allow adjustable rate mortgages. Some may also be picky about the length of the loan, while others offer 12, 20, 25 or 30 years for repayment. Consider these and other term-specifics when choosing a lender to ensure you get the mortgage that best suits your needs and preferences.
Apply for a Mortgage Today
A favorite choice among Americans when buying a home is a credit union. Credit unions are not profit-driven. Instead, they focus on breaking even and providing benefits to its members. This typically translates into lower interest rates and more flexible terms for you.
At American Union Federal Credit Union, we focus on serving the underserved and giving second chances. Whether your credit is excellent or could use a boost, we may have a home loan offer that works for you. Contact us for more information.