Becoming a homeowner is the American Dream. And, because homeownership is of monumental importance in your life, you should shop for a mortgage lender who is ready, willing and able to make your dream a reality. Mortgage lenders are NOT all the same! While interest rates are important, there is more to the mortgage process that you should know.
A discussion with your mortgage lender should include the five C’s. The five C’s are used by lenders to gauge the creditworthiness of potential borrowers. The five C’s are:
- Character – Good character is a “no excuse” attitude of accountability, trust and ethics that both you (homebuyer) and the mortgage lender should share. Character is reflected in the borrower’s credit history. Character you should expect from a mortgage lender can be determined by a “promises made- promises kept” platform.
- Capacity- Your ability to repay the mortgage. A mortgage lender will compare recurring debts to income (Debt to Income or DTI).
- Capital- Mortgage lenders will consider any capital the borrower puts toward a potential investment (down payment).
- Collateral- Collateral can help a borrower secure a loan- mortgages are secured by homes.
- Conditions- The conditions of a loan, such as its interest rate and amount of principal, influence the mortgage lender’s desire to finance the borrower
When choosing a mortgage lender to help you through the home loan process you should ask the following questions:
WHAT TYPE OF LOANS DO YOU OFFER?
Since there are many different types of mortgages it is important to find out what loan programs the mortgage lender has to offer. Typically all lenders will offer Conventional, FHA, VA or RD (USDA) home loans. Please click here for more information about each type of home loan.
WHAT IS THE INTEREST RATE?
All mortgage lenders have access to the same pool of competitive interest rates. The interest rate is going to be based on the size of your home loan and your credit score.
WHAT IS MY PITI GOING TO BE?
PITI equals Principal/Interest/Taxes/Insurance. It is important to include taxes and insurance in your calculations when determining your monthly housing budget. While Principal and Interest monthly should remain stable (if you have opted for a fixed-rate mortgage) taxes and insurance may fluctuate. Be prepared- costs for taxes and insurance may change.
IS THERE A PRE-PAYMENT PENALTY?
As your financial station in life changes you may want to pay off your mortgage. It is important to make sure your lender won’t charge you for paying off your home loan early. A mortgage with a prepayment penalty may cause your monthly payments to adjust if you pay extra towards the principal or cause you to pay a penalty if you decide to refinance, sell or pay off completely.
WHAT MORTGAGE LENDER FEES AND COSTS WILL I HAVE TO PAY?
Every lender will charge differently to work your home loan. Some typical fees may include, but are not limited to: underwriting, processing, appraisal, credit report and flood certificate. Some mortgage lenders may also charge points (or origination fees) and application fees. It is important to know what mortgage lender costs will be associated with your loan and why.
HOW LONG DOES IT TYPICALLY TAKE FOR A MORTGAGE TO CLOSE?
While this varies from lender to lender, you should expect your home loan to close between 30 to 45 days. In order to expedite the process, it is a good idea to have all the necessary documentation to your lender as soon as possible.
WHAT ARE CLOSING COSTS?
Some of the largest expenses involved in the purchase of a home are closing costs. Closing costs are fees that are paid at the end of the transaction. These costs can be paid by the seller, the buyer, or shared by both. Typical closing costs may include, but are not limited to:
- Attorney fees
- Title Service Costs
- Recording Costs
- Survey Fees
- Brokerage Commission (to realtors- typically paid by the seller)
- Appraisal Fees
- Inspection Fees (if required)
- Homeowners’ Insurance
- Property Taxes
Often, closing costs can be as high as 2 to 5 percent of the home’s purchase price.
WHO DO I CONTACT IF I HAVE QUESTIONS?
Customer service is key in mortgage lending! Hands down the number one criterion you should consider when choosing your mortgage lender is customer service!
Find the mortgage lender that has the best reviews from satisfied customers. The best mortgage lenders are those who take personal responsibility for your loan. This means they:
* Communicate in a timely and courteous manner
* Deliver documents without delay
* Anticipate complications and take proactive steps to avoid them
* Manage the loan process thoroughly and competently from start to finish
* Meet crucial purchase contract deadlines
Click here to read what Kara Davis’ of Crew Lending customers have shared about her level of service before, during and after the mortgage loan process.
One of the biggest factors in buying a home is the financing. It’s a place where many things can go wrong- from a mortgage lender being careless when scrutinizing the loan application, to misplacing documents, not asking for the right documents, overlooking potential trouble spots and red flags, to forgetting to order an appraisal and ultimately not being able to close the home loan on time. Some lenders may over promise and under deliver.
Meeting contractual obligations on time is another important consideration. A dependable mortgage lender will help to keep everything on track and on time thus contributing your personal peace of mind.
So how should you choose a mortgage lender? Remember that customer service is key to the process of mortgage lending. Ask people in your sphere of influence to see who they recommend. Ask your family and friends, realtor, financial advisor, accountant or attorney. Call several local mortgage lenders. Interview several mortgage lenders. Ask them the right questions and listen closely for the right answers. No need to ask about rates or fees (generally all the same)- find a mortgage lender who you TRUST!
Kara Davis of Crew Lending is a leading provider of home mortgages in Lake Charles Sulphur, Westlake and the entirety of Louisiana. For more information call Kara Davis at 337-842-0115 or click here for more information.