The purchase of a new home requires learning all about various aspects of homeownership (financial, legal, and practical) that can be overwhelming to a first-time homebuyer and homeowner. As part of our ongoing All About series, LGI Homes seeks to provide an easy-to-read and easy-to-understand resource that goes in-depth on a variety of subjects connected to buying a home. Today, we explore the process of shopping for a lender and how it will play into your experience of buying and owning a home.
What is a mortgage lender? – Most people don’t have the money to purchase their house with cash, so they take out a loan to cover the cost and pay the loan off over a set period of time. A mortgage lender is any company who offers loans to home buyers to finance the purchase of their home.
Are there different types of lenders? – A number of different types of companies and businesses may offer mortgages. This includes mortgage bankers, commercial banks, credit unions and correspondent lenders. There aren’t any specific benefits to borrowing from one type of lender over another. You want to focus primarily on who is offering you the best deal rather than what the company typically specializes in.
What should I do before I start looking for a lender? – Before you start researching current interest rates and looking up the reputations of potential lenders, pull a copy of your credit report and check it thoroughly. It is estimated that up to 35% of all credit reports contain inaccuracies, and the smallest error could impact your interest rate or lead to a lender denying your application for a loan. Make sure everything in your report is correct and file a dispute for any inaccuracies you find with the agency that reported it. You should also look up current interest rates, as rates tend to fluctuate monthly based on market conditions.
How do I find lenders? – There are a number of ways you can find a company willing to loan you money to purchase a home. You can perform a simple internet search if you’re a do-it-yourself type of person, or your real estate agent can put you in touch with lenders he recommends. Mortgage brokers are professionals who work closely with lenders, and about 50% of home buyers use a mortgage broker to shop for a lender for them. Alternatively, we at LGI Homes have our own team of expert mortgage specialists who can work with you.
What should I look for in a lender? – You should look for a lender you trust. Make sure any lenders you meet with are licensed and take time to verify their reputation with customers as well as their approval rating through the Better Business Bureau.
How do I know I’m getting a good deal? – A good deal on a mortgage involves the lowest interest rate you can secure with your credit rating and current market conditions.
Image license: iStockphoto (view source)