Choose Your Lender
When Buying Boston Area Real Estate
It’s not required that you close with the lender who gave you your pre-approval. However, it makes sense if they can provide you with a good rate and good service. But this is the time for you to shop lenders if you are not sure this lender is the one for you.
Most of us don’t know how to shop lenders. We start calling various lenders to see what their rates are. Then we hear about the bait-and-switch games where one rate is quoted and later another is substituted and we throw up our hands in dismay. In reality, the only rate that really counts is the rate available on the day you lock-in.
In addition to getting the best available rate there is the question of lender fees which can vary considerably. Things like application fees, processing fees, underwriting fees, document preparation fees, discount fees, and hidden fees can be thousands of dollars different from one lender to another. Getting a Good Faith Estimate (GFE) from each lender is the only way to get anything close to accurate numbers.
Then there are various types of loans to consider. How do we choose from the myriad of available loans? Is a fixed loan best? How long a term should I pick, 15, 20, 30, or 40 year amortization? How about an adjustable rate mortgage (ARM)? What about interest only? Is negative amortization or an option ARM a better choice?
To complicate things even more there are different types of lenders including banks, credit unions, mortgage brokers, mortgage lenders, etc. We don’t know the difference, so we give up and settle for someone with a friendly face and a nice smile.
So how do you shop for the best loan? If we’re convinced that good homework will turn up the best loan program, how do we go about it?
Getting a good interest rate can be difficult. How do you know what a good rate is right now? A neutral site to give you the average interest rate for loans is HSH.
It’s important to know your credit score before you start calling lenders. Only call credible lenders and use the following script inserting your specific numbers. “My credit score is _____ and I’m looking for a 30 day lock on a _____ thousand dollar loan with no points. Please tell me what your rate lock is today and what your costs are."
Next you compare the Good Faith Estimates, identify the fees that are not lender controlled, and choose the lender that offers the greatest savings. Even fees that are not controlled by the lender can vary. Some lenders are able to negotiate better fees with their service providers. A good Buyer’s Agent can help you with this and help you match the GFE with the actual Settlement Statement you should get prior to closing.
Now is the time to choose. Because it is the lender you will use that orders the appraisal it is imperative that you choose your lender now. Try to do as much of the above as early as you can. After the home inspection you need to decide! next topic »
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