Picking the right mortgage company is imperative if you want to avoid headaches during the mortgage application and closing process. It’s not the best idea to simply go with the first one you see or the one with the biggest name. You should compare rates from several mortgage lenders to make the best decision for you.
Types of Mortgage Companies & Differences Between Each
There are four main types of mortgage companies. Knowing the mortgage landscape can help you decide which type is best for your situation
- Credit Unions: These are member-owned financial institutions. They sometimes offer more favorable mortgage rates to shareholders; however, you will need to be a member in order to take advantage of these rates. Also, in some cases, credit unions are more limited in the amounts and types of loans they can offer.
- Banks: The main benefit of working with your bank on your mortgage is the convenience it offers. If you’ve already got an account, and you know there are many locations that can serve you, getting a mortgage with them is a nice convenience. But compared to a credit union, costs and rates are typically higher with big banks.
- Mortgage Brokers: Brokers have access to a variety of lenders and different loan programs instead of lending money directly. This is good if you want access to the most options and get the best possible mortgage for your situation.
- Mortgage Lenders: Mortgage lenders are the companies that actually finance your loan. The difference between a lender and broker is that the broker works with multiple lenders, while the lender is the group that lends the money.
Tips for Working with Mortgage Companies
Boost That Credit Score
You must meet certain credit and income requirements to prove to mortgage companies you will be able to repay the loan. Having a low credit score shows lenders that you are a risky client to lend to. The good thing is you can elevate your credit score. Get your credit report from a credit bureau. You can receive a free copy of your report every 12 months. Try to pay off your highest interest debts first and improve your debt to income ratio.
Getting pre-approved will make you look better against other buyers when putting offers on homes. Contact your mortgage lender to get an official mortgage preapproval letter. It’s also good to get preapprovals from more than one company that way you can compare loan estimate forms from each one. This will help you determine which one is offering the best rates and terms for you.
The first thing you may do is search for rates online. Keep in mind, these online rates are estimates and are not exact. A broker/lender will pull your credit and process the information for the loan to provide you with an accurate rate. You can lock this rate in if you are satisfied. Once you have many rates in hand, you can compare all of the costs to make a proper financial decision. Remember that a rate isn’t always the most important thing. You want to make sure you are in good hands and feel like your mortgage company has your best interest in mind.
With so many bad actors out there, it is critical to take your time when selecting your mortgage company for your home loan. Reviews, responsiveness, accessibility, location and more all should have a big impact on your decision. In addition, your unique situation will call for a customized approach and the company you work with should function as a mortgage advisor, not a salesperson.