Everything You Need to Know About Choosing the Right Mortgage Lender
As you set out on your search for the perfect match in a new home, you’re also looking for a partnership with an experienced mortgage lender. As we all know, mortgages last a long time so you want to choose a lender that will suit your needs, both now and for the years to come.
Here are some things you’ll want to think about prior to choosing your lender so you can feel confident in your decision.
Do Some Online Research
You can access rate comparisons of different lenders online. Just be careful not to give out your personal information to get a quote. Often, in order to see the different rates, you have to give your email and phone number which can lead to potentially aggressive sales correspondence. If you’re looking for a secure place to research lender options, take a look at Ratehub and LowestRates for more information.
Once you’ve got an idea on interest rates, check out online calculators to help you find an average for your mortgage payment.
Another option is to call mortgage lenders directly and ask questions. Even if you’ve checked them out online, this will give you a better feel for how they operate and what’s involved.
Get a Referral from Family and Friends
Has anyone you know had a standout experience with a lender or mortgage broker? If a friend or family member has had an excellent experience, it’s worth your while to check them out too! Just be sure to research the lender’s reputation within Edmonton as it may differ in experience from city to city, especially with larger or chain companies.
You can ask your real estate agent if they can provide some insight. A good agent will recommend who they actually think would be best for you, not just the ones linked to their office.
Using The Builders Preferred Lender
Another option you can consider is using your home builder’s preferred lender. These lenders are very easy to work with since they have worked with your builder many times before. They understand how the mortgage process differs with a new home build versus a resale home.
This can mean a quicker approval process – and getting you into your home that much faster.
Consider a Mortgage Broker
Another smart option that will save you a lot of time is using the services of a mortgage broker. They do the work for you, searching out the best possible rates from lenders you may not have thought to look at before. The rates may be lower than you can find on your own, too.
A mortgage broker does not charge to do this either, because they are paid by banks and lenders when you lock in on a loan they find for you.
Check With Your Bank
If you do most or all of your banking with one company, it’s a good idea to ask what kind of rates they can offer you. They will consider your brand loyalty and may be able to offer you a better rate than their competitors.
It’s also easier for you to have your mortgage with the same bank because you can manage your payments online and see all of your accounts in one place.
Variable or Fixed Rate?
Think about your future and where you see yourself in five years as you compare different mortgage types. If you want to buy a home soon, but see yourself moving in a few years then a variable rate is the better option. It is a higher rate but gives you the freedom that a fixed rate won’t.
When you move into a new home and start making mortgage payments, most of the money goes towards interest, at least for the first few years. This is why you should be looking at staying in your home for at least five years and locking in at a lower, fixed rate. If you want to relocate, this is something to think about a year before you need to refinance so you can go for the variable rate next time.
Promising Rates and Service
Choosing a lender is more than just getting the best rate. You deserve good service so be sure to choose an institution that returns your calls and answers your questions.
Here are some things you should ask about when meeting with a lender:
- Does this rate come with fees or mortgage points?
- Can you put these fees into the overall mortgage cost?
- What are the closing costs?
- When can I lock in the interest rate?
If you run into some spare cash from a bonus at work or a lucky lotto ticket, it’s nice to know if you can pay some mortgage payments before they’re due to save on interest. Some lenders will charge a penalty for paying extra, so be sure to ask their policy before you make your decision. A good lender shouldn’t be penalizing you for being ahead of the game with your mortgage.
Make a List and Compare
Make a list of all the lenders you’ve researched and compare the key points about each. We recommend looking at the rate, overall experience and ease of contact for simple questions. From there you can choose which one you think will be best to meet with.
Get Pre-qualified and Pre-approved
Pre-qualification and pre-approval are both helpful to the home buying process. When you pre-qualify you’ll have a better idea as to what you can afford but you still have a chance to change your mind on whom you use as a lender.
A pre-approval, on the other hand, offers a more solidified mortgage loan amount you can actually use as leverage to buy a home. Since pre-approvals are considered a “hard” credit inquiry, you’ll want to do this after you’ve chosen your lender.
Keep the above in mind while shopping for a mortgage and you’re sure to find a lender that best suits your needs. Remember, a little research goes a long way in helping you find the home (and mortgage) of your dreams.
Originally published Aug 4, 2017, updated Oct 7, 2019.