In addition to shopping for a house, you will also be shopping for a mortgage – unless you pay cash for your home, which not many of us can do. Finding the right lender can save you money and stress. Here are a few tips on finding a lender and mortgage that fits your needs.
TYPES OF LENDERS
There are three types of lenders to look at when shopping for a home mortgage.
Your local bank or credit union where you have your checking and savings account is a great place to start your mortgage shopping. These are FDIC-insured institutions and will sometimes offer you a discount if you also get your home mortgage through them. Once they have loan you money for your mortgage, they may either keep the loan and service it themselves, or sell the loan on the secondary market. You will deal with a loan officer who gets a base salary and usually a small commission or bonus for writing your loan.
These are banks that specialize in mortgages. They will loan you the money and then either keep the loan or sell it on the secondary market. If they do sell your mortgage, they may sell the entire mortgage and you will end up with another company servicing your mortgage – i.e., your payments and customer service may go to a completely different company. The mortgage bank may decided to just sell the loan but keep the servicing of your loan under contract to the mortgage holder. In other words, the loan purchaser may give the mortgage bank money for your loan, and receive the interest payments, while you continue to make payments to the mortgage bank and deal with them for customer service. Or the mortgage bank may decide to keep the loan in-house. Like with a traditional bank, you will deal with a loan officer who gets a base salary and commission or bonus for originating your loan.
Mortgage brokers work with a variety of lending sources and can shop your mortgage for the best rates. They are paid a commission knows as a “yield spread premium”. They will help you get qualified, provide advice on various types of loans, and typically are much more flexible in dealing with unusual loans.
THE BENEFITS OF WORKING WITH A LOCAL OKLAHOMA MORTGAGE LENDER
While the internet has made it easy to work with lenders from across the country, there is still a major benefit to working with a local Oklahoma lender. I close dozens of homes every year and consistently find that working with a local lender is usually smoother, faster, and less stress than working with out-of-state lenders. One exception has been my work with Freedom Eagle, a VA lender based in Utah. They understand VA loans and work closely with me on buyers. They have a great track record of closing on time with happy clients.
Local lenders understand the intricacies and deadlines involved with Oklahoma real estate transactions. They know how Oklahoma real estate law works, how title is slightly different here than in most states, and understand the deadlines in our real estate contracts. If a transaction runs into a problem – for example, a home buyer inadvertently goes out and buys a home full of furniture before closing (DON’T DO THIS!) a local lender can help smooth over the credit issues that might happen in such a case.
QUESTIONS FOR LENDERS
Here are a few questions you should ask lenders before making your decision:
- How much time do they need to complete the mortgage (30 days is normal, although in some situations it can take 45 days or longer.)
- When can I lock my interest rate?
- How much do you charge for discount points and should I consider them?
- Should I consider an adjustable rate mortgage or stick with the more traditional fixed rate mortgage?
- When will my monthly payment be due?
- How much will the monthly payment be?
- What are the closing costs associated with my mortgage? (I will provide an estimate early in the transaction, but you will get the final costs from your mortgage company.)
- Who do I talk to after close if I have an issue with my mortgage?
- Is there a prepayment penalty?
YOUR RESPONSIBILITIES TO THE LENDER
Just as you want a lender that is responsive and easy to work with, you will also have a responsibility in providing the information they need on a timely basis. Be ready to provide income verification and bank records on a timely basis. Don’t try to fudge your numbers to get a better rate – this will bite you! If you have issues with your credit report, let the mortgage broker (and me) know up front so they can provide guidance in advance. This is a lot better approach than surprise close to closing. Nobody likes surprises!
Kim & Mandy Butler-Thomas
Cornerstone Home Lending
Citizens Bank of Edmond