Philippines Finance

Sep 7 2018

How to Choose a Mortgage Lender

Put together your financial portfolio. The more information you are able to provide about your financial status, the easier it will be to maneuver through the mortgage application process. Collect a list of information about your debts and assets and print out a summary that you can show to lenders.

  • Get an updated credit report. Take care of details that are not correct and pay outstanding debts as much as you can. This will increase your credit score and allow you to get better interest rates. [1]
  • Make a list of your debts. Include balances owed and account numbers. You’ll need this information when you fill out a loan application.
  • Put together a list of all your assets. This should include both checking and savings accounts, investment accounts, retirement accounts and any personal property you own (like cars or boats).

Refresh your memory of loan terminology. There are some basic loan terms that are simple to understand but may be confusing at first to borrowers who are unfamiliar with them. Learn a few of the basic terms so that you understand what your lender is talking about and know what to look for. Your lender should also be able to explain these terms and any other, more complex terms that may show up. For now, start with the following terms:

  • Annual percentage rate (APR). This is the annual interest rate charged on the loan.
  • Lender fees. These are additional fees (on top of interest) that are paid to the lender at closing.
  • Loan program. This is the general type of mortgage that describes the interest rates and length of the loan’s life. Some common loan programs include 15-year fixed mortgage rate or 30-year adjustment rate mortgage (ARM).
  • “Good Faith” estimate. This is the initial, pre-approval set of loan terms given to you by a lender. It includes the interest rate and any additional fees that will be charged. [2]

Decide what you’re looking for in a mortgage. It will be difficult to find the right lender if you don’t know what kind of mortgage you are looking for. For example, think about how quickly you want to pay off your mortgage. The lives of these loans can vary widely in length, so make sure you know what your plan is. Just make sure to consider that paying off the loan in a shorter time will result in higher monthly payments (but less overall interest paid). [3]

Make a list of questions to ask. Think about specifically what you want to know when applying for a mortgage loan. For example, consider asking what monthly payments would be under a variety of different loan terms. Or, you could ask why certain fees are charged. You can ask any number of things of your lender without even applying for loan, so ask as many questions as you need to. If your lender doesn’t take the time to respond to them or is difficult to reach, you may want to seek other lenders. [4]

  • Keep the questions consistent between lenders so you have a standard of comparison.
  • Ask about special mortgage loans if you think you qualify for them. [5] Special loan programs include VA loans (for veterans of the armed forces), USDA loans (for rural areas), and programs offered by state or local governments. These programs may offer borrowers lower rate or better repayment terms. [6]

Part Two of Three:
Finding Lenders and Getting Quotes Edit

Ask around for recommendations to reputable mortgage brokers who can give more options by being independent from the lenders and banks. The first lender you find may not have the best loan package. You should take advantage of any connections you have that can refer you to a reputable mortgage lender.

  • Call your current mortgage lender or bank, if you’ve had a good experience with them in the past. Being a return customer may give you some leverage with negotiations.
  • Search the Internet financial sections for mortgage interest rates.
  • Talk to friends for recommendations.
  • Take recommendations from real estate professionals for mortgage lenders they’ve had a good working relationship with. [7]

Ask each prospective mortgage lender what their interest rates are for the type of mortgage you are considering. Don’t be afraid to ask questions if you don’t understand the type of loans they’re proposing.

  • For example, you should always ask for the specific interest rate charged on each loan duration. This is also known as the annual percentage rate (APR).
  • Additionally, you should ask whether the stated interest rate on each loan is fixed (non-changing) or adjustable (changing). [8]

Gather the interest rates applicable to various loan terms at each mortgage lender. Get interest rates for various different types of loans and loan durations from each lender so that you can compare these different loan types between them. This also will be helpful if you change your mind about the loan duration you want.

  • For example, imagine you are considering either a 15 year or a 30 year loan. You ask for rate estimates from two lenders. The first offers you a 15 year loan at 3.1 percent and a 30 year estimate of 3.8 percent. The second offers rates of 3.2 and 3.7 percent, respectively. You would then see that the first lender offered a better rate for the 15 year loan but was not as good of a choice for the 30 year loan. [9]

Request a written explanation of the estimated charges, costs and/or fees that the lender would require of you at closing time. This statement is a “Good Faith Estimate.” Most reputable mortgage lenders will offer to provide this for you.

  • Make sure the Good Faith Estimate includes costs for all points, processing, legal fees, filing and closing fees.
  • You can also have the lender email or fax this estimate to you as a backup. [10]

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