Guest Post: Choose your Mortgage Lender Wisely

Shopping for a home is a costly exercise in more ways than one. If you’re not careful, you could end up paying not just your mortgage but also your peace of mind if you’re stuck with a crooked or inept mortgage lender. Just as it’s important to look around before you buy a home, it’s necessary to make inquiries, check your facts and do a few calculations before you decide where you’re going to get the money to pay for your home. Here are a few pointers to help you choose a good mortgage lender:

• Interest rates make a huge amount of difference when you’re paying back your loan over a longer period of time. You don’t want to end up paying more than you have to, so bargain and get the rate down as much as you can. Shop around for the best rates on the Internet and ask your lender to match the lowest rate you find online.
• Be wary of interest rates that seem too good to be true – the loan will more often than not include other costs and fees that are exorbitantly high.
• While it’s important that you choose a lender who offers the lowest interest rates, there are other things to consider as well. If you feel interest rates are going to increase at a later date, ask if your lender will allow you to lock in your rate. Get the deal in writing with all the necessary details – fees included for the lock and how long the lock lasts.
• Choose a lender who does not deviate too much from his/her Good Faith Estimate (GFE). A GFE is a statement of all the costs that your loan entails including fees that are paid to others with a stake in the deal like appraisers and home inspectors. While a lender is bound by federal law to provide you with a GFE within three days of receiving your loan application, he/she is not forced to abide by the figure in the document.
• Find out if your lender is paying your loan officer a Yield Spread Premium, a commission for sending the loan his way, and if this will increase your costs considerably.
• Beware of lenders who are eager to loan you money without taking your financial situation into consideration. A good lender will seek the right information from you and tell you about the alternatives available before approving your loan.
• Find out when the money will actually reach you once the final application is approved.
• Some lenders charge you a penalty for paying back the loan early. Check if there are prepayment penalties to your loan if you’re thinking of earning more to save on interest and pay off your loan before it’s due.

It’s best to go with a lender who’s known to you or a friend or family member. Ask for help from people who have bought homes recently before you settle on a mortgage lender.

This article is contributed by Sarah Scrafford, who regularly writes on the topic of international real estate listings. She invites your questions, comments and freelancing job inquiries at her email address: sarah.scrafford25@gmail.com.