Wealthful Wednesday: Lender Tips

1. GET YOUR CREDIT SCORE IN SHAPE

Not everyone can qualify to buy a home; you will have to meet certain credit and income criteria to assure mortgage companies you can repay the loan. A low credit score signals that lending to you is risky, which means a higher interest rate on your home loan. The higher your credit score and the more on-time payments you make, the more power you will have to negotiate for better rates with potential lenders. Generally, if you have a score under 580, you’ll have a tough time qualifying for most types of mortgages.

2. KNOW THE LENDING LANDSCAPE

Understanding the major players will help you navigate the crowded lending field. Here are the most common types of home lenders.

– Credit unions: These member-owned financial institutions often offer favorable interest rates to shareholders. And many have eased membership restrictions, so it is likely you can find one to join.

-Mortgage bankers: They work for a specific financial institution and package loans for consideration by the bank’s underwriters.

-Correspondent lenders: Correspondent lenders are often local mortgage loan companies that have the resources to make your loan, but rely instead on a pipeline of other lenders, such as Chase, to whom they immediately sell your loan.

-Savings and loans: Once the bedrock of home lending, S&Ls are now a bit hard to find. But these smaller financial institutions are often community-oriented and worth seeking out.

-Mutual savings banks: Another type of thrift institution, like savings and loans, mutual savings banks are locally focused and often competitive.

3. GET PREAPPROVED

Getting a mortgage preapproval letter before you start looking at houses will give you an edge when bidding against other buyers. The letter shows the seller that you’re a serious buyer whose loan is likely to close. It’s evidence that a lender has evaluated your finances and figured out how much you can afford to borrow, and therefore how much house you can afford. Getting preapproved now will also save time later. To get preapproved, you’ll have to provide lenders your financial information. Here is a list of what a lender typically requires: Social Security number, Bank, savings, checking, investment account information, Outstanding debt obligations, including credit card, car loan, student loan and other balances, Two years of tax returns, W-2s and 1099s, Salary and employer information, Information about how much of a down payment you can make, and where the money is coming from.

4. COMPARE RATES FROM SEVERAL MORTGAGE LENDERS

Start by searching for the best mortgage rates online. A lender or broker will have to pull your credit information and process a loan application to provide an accurate rate, which you can then lock in if you are satisfied with the product. Once you have several quotes in hand, compare costs, and decide which one makes the most financial sense for you. While there is more to finding a good lender than picking the lowest rate, that does not mean the rate isn’t important. The total interest you pay over the life of the loan is a big figure, and a low rate can save you thousands of dollars.

5. ASK THE RIGHT QUESTIONS AND READ THE FINE PRINT

-How do you prefer to communicate with clients — email, text, phone calls or in person? How quickly do you respond to messages?

-How long are your turnaround times on preapproval, appraisal and closing?

-What lender fees will I be responsible for at closing? (Fees may include commission, loan origination, points, appraisal, credit report and application fees.)

-Will you waive any of these fees or roll them into my mortgage?

-What are the down payment requirements?