How to Choose the Right Mortgage Lender for You
It’s important that you choose the mortgage lender that’s best for your unique needs. Mortgage lenders come in many types and sizes, and they offer different products and services. Their representatives have varied educational and ethical standards and different levels of experience. Many people assume you should go straight for the mortgage lender that offers you the best rate, but there are many other factors to consider.
Do your research.
What is a mortgage lender?
The phrase “mortgage lender” has many meanings, but generally, it is a bank or independent lender that offers and underwrites home loans.
Retail banks range from smaller local banks and credit unions to big-name national brands. They also offer non-mortgage financial services like credit cards, checking, and savings accounts. Banks often keep their loan servicing rights.
Independent lenders like Atlantic Bay only do mortgages, so their sole focus is to find you the best mortgage option. Independent lenders may maintain some of their servicing rights, or they may sell the loans to banks, independent investors, Fannie Mae, or Freddie Mac.
Independent lenders like Atlantic Bay only do mortgages, so their sole focus is to find you the best mortgage option.
A mortgage broker places loans with both independent lenders and retail banks on your behalf. The loan is then funded through the lender to which your broker takes your loan. In a sense, they are middleman between you and the mortgage banker. Therefore, if you choose a broker, you won’t actually work directly with the bank or mortgage lender; everything will funnel through your broker. Usually mortgage brokers make money by charging up-front broker fees and/or origination fees.
What is a mortgage banker?
A mortgage banker (also called mortgage lender, mortgage loan originator, or loan officer) is an individual who guides buyers throughout the mortgage approval process from application to closing (and if they’re a good one, beyond).
Mortgage lenders employed by banks, credit unions, and other federally-regulated “depository institutions” are simply federally “registered” and are not required to be “licensed” by a state. In other words, they do not have to take an exam or complete annual continuing education, but instead work under the umbrella registration of their institution.
On the other hand, mortgage lenders like Atlantic Bay are “non-depository institutions” that don’t collect monetary deposits, but instead bring in payments either to invest or provide credit to others. Mortgage lenders working at non-depository institutions differ because they’re required to be individually state-licensed. The training and education standards are set very high to obtain a license, so they’re held to a higher level of mortgage competency.
Credibility counts.
The Nationwide Mortgage Licensing System (NMLS), allows you access to administrative and licensing information for federal- and state-regulated mortgage lenders. Each lender receives a unique identifying number; their number will never change. The NMLS Consumer Access Website gives you information on whether your potential mortgage lender is licensed, whether they’ve been subject to any disciplinary proceedings, what companies they’ve worked for, and how long they’ve been in business.
Look for efficiency.
What is the expected closing time?
Lenders’ average closing times and on-time closing percentages should be an important part of your lender decision. As a buyer, you want to close on-time and without issue. A delayed closing can cause stressful inconveniences like penalty fees and missed moving-related appointments.
TBD/upfront underwriting speeds the process.
Some lenders like Atlantic Bay offer To-Be-Determined Underwriting (TBD), often referred to as upfront underwriting. With this type of underwriting, lenders may be able to issue you a conditional approval before you even have a physical address for a home or purchase contract. You will know exactly how much you are approved for at the very beginning, saving you time. Once you do have a purchase contract, the mortgage process is streamlined because the remaining items needed are minimized.
Once you do have a purchase contract, the mortgage process is streamlined because the remaining items needed are minimized.
On the contrary, lenders who don’t offer TBD underwriting don’t do a full credit and income review until you have a property address. Any potential issues wouldn’t be discovered until after a contract had been signed, inspections scheduled, and the earnest money deposit had been paid. If you’re looking for a smoother, quicker process, consider a lender who offers TBD underwriting.
Find the right personal fit.
Ask for recommendations.
A great way to find a lender is to ask for recommendations from friends and family. If you know someone who has closed on a home recently, pick their brain on their experience, their lender, and their mortgage banker. Ask what they loved, what they wish they would have known, and if they’d recommended who they used to get their mortgage.
Interview multiple candidates.
It's smart to look at several lender options, and don’t be afraid to ask questions. You don’t have to apply for a loan to interview.
If you’re considering working directly with a mortgage lender or bank, ask about specific experience, turnaround times, and rate lock options. If you’re using a mortgage broker, ask how the broker makes money on your loan and how it will affect the interest rate. Also find out how many lenders the broker typically works with.
Remember too that customer service is key. Buying a home is one of the most significant purchases you’ll ever make, so you want to have confidence in the individuals helping finance this purchase. For example:
Do they answer your questions knowledgeably and in a timely manner?
Do they seem friendly, competent, and informative?
Also, were you ever on hold for a long period of time? Or if your call wasn’t answered right away, did they return your call in a timely manner?
Do you feel rushed or pressured? How you are treated and how you feel during these beginning stages are a good indicator of how the rest of the process will go.
Compare the financial details.
Dollars and sense.
Of course, your biggest question of all will likely be, “What is this loan going to cost me?” While you may have received several estimates that range in closing cost totals, keep in mind that those totals are just that: estimates. The main three costs you can truly compare are lender fees (application or underwriting fees, origination charges, etc.), discount points, and interest rates.
The main three costs you can truly compare are lender fees (application or underwriting fees, origination charges, etc.), discount points, and interest rates.
But remember that rates can change multiple times a day. So comparing rates from lenders on different days could show disparities that are a result of the market, rather than differences between the lenders. In addition, be sure to compare apples to apples. Different programs, loan amounts, sales prices, etc. will result in different numbers.
Choosing the right lender can go a long way toward getting you in that new home quickly and smoothly. At Atlantic Bay, we want to be your loan adviser for life, and we are here every step of the way to help you.
For more information on the mortgage process, visit our Knowledge Center.