If you’re a first-time home buyer, finding the right mortgage lender may seem a daunting task. Choosing a mortgage lender is certainly one of the most complicated decisions you’re going to make regarding your home mortgage. The task of picking the right one is intricate because there are plenteous mortgage lenders who are willing to accept your loan application.
However, just like shopping for a car or choosing an insurance policy, here also it is necessary to do some research and compare your options to find the best deal. Selecting the best mortgage lender for your needs is crucial because you are going to be encumbered with this mortgage for years to come.
It is noteworthy that a good mortgage is not simply about finding the lowest rate; you need to consider other factors as well. As a first-time home buyer, you should look for mortgage lenders who offer government-backed loans, low down payment options, reasonable fees, and financial assistance programs.
In this post, we have listed five tips to help you pick the right mortgage lender when buying your first home.
1. Check your credit score and history
If you’re a first-time home buyer, make sure to educate yourself about the credit score requirements. This is because your credit score and financial history are going a play a vital role in determining your mortgage rate. Lenders review your credit score to find out your debt-to-income ratio which in turn determines how much they’ll let you borrow.
There are many different types of mortgages and mortgage lenders. While some lenders only offer loans to borrowers with great credit scores, some others happily welcome borrowers with lower credit scores. So, before reaching out any lender, it is best to first check your credit scores, so that you can have an idea of what to expect from a lender.
2. Look for first-time home buyer programs
To help first-time homebuyers, some lenders tie-up with state agencies to offer special programs such as rate discounts, or down payment assistance to provide an affordable loan. Often these programs are available for public servants, veterans or those with student loans. Such mortgages are handled by typical banks, credit unions and non-bank lenders and the eligibility requirements depend on various factors. So, make sure to inquire in advance about any such program.
3. Compare interest rates and more
Your ultimate goal is to find the lowest rate, so make sure to compare the rates of various lenders. Moreover, to get a better understanding of what you’ll pay over the life of the loan, compare annual percentage rates.
In addition to this, the fees charged, such as application, appraisal, or loan origination fees varies from lender to lender. Consider applying to at least three different lenders, so you can compare offers and get the best deal. Also, ask about how much down payment is required.
4. Think about hiring a Mortgage Broker
For first-time home buyers, hiring services of a mortgage broker may seem convenient because they perform all the complicated and tiring work related financing and gets you the best mortgage deal. However, make sure to consider the drawbacks of working with a mortgage broker as well. Hiring a dodgy broker may result in paying more rates than what you have found by yourself. So, take a little time to do a little research, ask for references and find a reliable and experienced mortgage broker only.
5. Find the mortgage which fits your needs
Once you determine what type of loan you need, your search for the right mortgage lender can somewhat get simplified. This is because often some lenders specialize in certain types of loans. For instance, conventional mortgages are not guaranteed or insured by a government agency which means the lender isn’t going to hold onto the loan for very long.
Buying a home is a huge investment, so make sure to take your time and choose a lender who will ensure that the mortgage process goes as smoothly as possible.