Tuesday, January 15, 2008

How to Find a Lender for a Home Loan


There are literally dozens of home mortgage lenders in virtually every locale. So how do you find the right lender for you? You have two basic options: you can hire someone (a mortgage broker) to find a lender for you, or you can take the do-it-yourself approach.


Difficulty: Moderate

Things You'll Need

  • Phone Books
  • Sunday Newspapers
  • Real Estate Agents
  • Online Mortgage/finance Services



Step One

Look in the Sunday edition of a local newspaper for the selected interest rates of lenders in your area. This is not a complete listing, but it will include a variety of different lenders and will serve as a good starting point.

Step Two

Look in your local phone book under 'Mortgages' for lenders approved for your area.

Step Three

Call lenders and ask about their interest rates, points that might be required and other closing costs.

Step Four

Ask about any low interest loans that may be available through local municipalities or the state.

Step Five

Find out about the amount of a down payment that is required for a loan.

Step Six

Ask how much the initial rate of an adjustable-rate mortgate (ARM) can go up in a single year (if you are considering an ARM), and the maximum it can be raised over the life of the loan.

Step Seven

Choose a lender based on who offers the best interest rate, who has the type of mortgage you are looking for and who is willing to work with you.

Tips & Warnings

  • One way to help cut down on the legwork of finding a lender is to work with a good real estate agent who has experience with many lenders and can give helpful advice. A good way to gauge an agent's advice is to compare that agent's short list with rates you have found on your own.
  • The most common mortgage lenders (or originators, as they are referred to) are traditional banks, savings and loan associations and mortgage bankers. Banks are probably the most visible since they advertise heavily and most everyone has a checking and/or savings account.
  • Because of bank consolidation, looking at smaller banks can prove worthwhile. They can offer very good rates, as do savings institutions.
  • Mortgage bankers do only mortgages, and the best ones offer very competitive rates.
  • For qualified low-to-moderate income families purchasing rural property, the U.S. Department of Agriculture offers loan guarantee programs. Contact the USDA/RA office in your area, listed in the blue pages of your phone book.
  • Low-to-moderate income, first-time buyers should also contact the National Council of State Housing Agencies (202-624-7710) to locate the agency in your state that offers low-interest loans to qualified buyers.
  • While real estate agents can be good sources for finding lenders, their word should not be taken as gospel. They may be experienced, but they may also simply be comfortable working with certain lenders and may not be up-to-date on the better lenders.
  • Mortgage lending is not the strong point of many banks, so often they don't offer the best rates.
  • Remember that the initial rates you get are not carved in stone. Rates can change quickly, particularly when interest rates in general are volatile.

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