Until the last several years, people have generally used traditional mortgage brokers or loan officers when trying to purchase a home. In recent years, more and more prospective home buyers are choosing online lenders over traditional lenders. What is the draw to online lenders and is it worth checking into if you’re in the market for a new home?
Obviously you’ll want to shop around for a home mortgage before signing on the dotted line of the loan application. Shopping around will help you get the best type of financing available with an interest rate you can afford. It may also enable you to save thousands of dollars over the length of your loan.
BUT – It’s important to realize that the best rate might hurt you in the end. It’s really much more important to make sure you have a knowledgable and trustworthy Mortgage Professional who is up to date on all the programs being offered and is able to tailor one to best fit your needs and goals.
You’ve probably heard of at least one online mortgage loan company; however there are numerous ones to choose from. They tout the ability to allow lenders to compete for your mortgage. Supposedly they’ll be able to get you a better interest rate and a better price if you use them. Is this true or is it merely a sales ploy to get you to use their service?
When considering a source for your mortgage, you’ll want to talk with a number of lenders. Check with online lenders and offline traditional lenders to get the best programs and pricing. Even if a lending company is traditionally an offline lender, they may have online sources available and each may give you a different price quote.
It’s important to have basic information available before you start your search for a loan source. You’ll want to know how much down payment you’ll have available. Pre-qualification to know how much you can afford for a house would also be helpful. Use the following as points you’ll want to discuss with each online lender or broker:
Rates including current mortgage rate. Is it fixed or adjustable?
Points are linked to interest and are paid to the lender. If you want a lower interest rate, you’ll be expected to pay more points. Fees including loan origination, broker fees, transaction, settlement, and closing costs. You’ll likely only receive an estimate, but it should be enough to compare lenders. Down payments and Private Mortgage Insurance are usually required. This could be as much as 20 percent of the loan as the down payment. Private mortgage insurance is often required for home loans with down payments less than 20 percent.
After you’ve spoken with a few lenders get pre-approved with the one that you feel most comfortable with. Pick the only1 lender and get the pre-approval process started. Then DON”T constantly check rates and points since it will make you crazy. Most lenders have over 40 products to choose from and it’s your lenders job to make sure you have the best one for your situation. Therefore- checking rates and points might be like comparing apples and tomatoes.
Once you’ve found the right lender and the correct mortgage program don’t forget to get the interest rate and points locked in from the lender and have them give you the lock-in rates in writing. They should also be able to lock-in these rates for a period of time, however you may be asked to pay a fee (usually returned at closing) to get the lock-in rate.
If your situation is a bit complicated- low credit score- a small downpayment or any other complication related to your income/assets/ or credit it may be best to work with a lender by phone or in person to ensure your loan approval.
We've been helping customers afford the home of their dreams for many years and we love what we do.
Company NMLS: 275975/247601
1288 Kifer Rd Ste 208
Sunnyvale, CA 94086
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