Here are a few tips to remember when choosing a lender.
How do you choose the right lender? Since most of our clients need a mortgage to buy a house, we get asked this question all the time, and there are a few things you need to consider.
In the end, price is king (i.e., what your house payment will be). To get the best price, though, you have to remember that it’s not always about getting the lower rate. For example, when I train new agents I always ask them, “What’s a better mortgage rate: 2.5% or 3%?” They always say 2.5%, but that’s not enough information to choose a lender.
You see, lenders also charge you for closing costs. You may be able to get a rate of 2.75% from one lender instead of 3% from another, but that 2.75% rate may come with a closing cost tally of $7,000 compared to just $3,000 from the other lender.
When I help buyers shop for a lender, the first thing I encourage them to do is use a local lender. Local lenders have more skin in the game and generally offer better service than national lenders. If you’re choosing between lenders, tell each of them the sale price of your future home and how much you’re able to put down so that they can calculate your monthly payment. Your monthly payment is made up of five costs: principal, interest, taxes, homeowners insurance, and private mortgage insurance (if you don’t put at least 20% down).
Then, compare the principal and interest costs because the rest of the costs won’t change no matter what lender you use. Homeowners insurance is something you shop for on your own. Your property taxes will be whatever they’re going to be—if one lender estimates a lower property tax than the other, your payment might look cheaper, but it’s not.
Also, remember that a good agent will help you navigate the process of picking a good lender. With as many buyers as the Downing Group helps each year, we know the good lenders from the bad ones here in the Columbia marketplace.
As hot as our market is, many lenders are simply overwhelmed and not doing a good enough job. Many closings have been delayed because lenders can’t handle the volume, and that costs buyers money. If, for instance, you’re prevented from moving into your new house on your preferred move-in date because the loan is late, you’re the one that has to foot the hotel bill.
If you’d like help picking a lender for your home purchase or have any other real estate questions, don’t hesitate to reach out to me. I’m here to help.