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Choosing the Right Mortgage Company
When you are ready to shop for a loan, you can work directly with a lender or with a mortgage broker representing many individual lenders. Direct lenders are lending their own money, have in-house programs and make the final decision on your application. Mortgage brokers are intermediaries who represent many lenders and loan programs from which to choose.
What to Ask About
When purchasing a mortgage talk to at least three different companies. Generally, the annual percentage rate is a good way of determining the cost of the loan. However, each lender's fees and rates differ. Your agent is generally your best source for finding a good lender, one that will tell you the truth, return your phone calls and place you into the best loan program. When comparing lenders:
- Ask for a good faith estimate of the closing costs in writing. When comparing the prices of different lenders, pay no attention to the title insurance costs or government recording fees. Those do not affect the price of your loan. Do pay attention to the loan fees, points and the interest rate.
- Ask how long the interest rate is valid. If a company quotes you at a very low rate with a 10-day lock, that means you'll have to close the loan within 10 days or the rate will go up. Ten days are not enough time, unless you have already been approved. Ask for a 30-day lock.
- Make sure you get the interest rate, the points and lock-length in writing.
What to Take With You
The loan approval process generally begins with an initial interview where you and the mortgage professional meet to discuss the potential loan. You will need to bring information to verify your income and long term debts.
You may prefer to meet with the mortgage company before house hunting to determine in advance how much you can afford and the mortgage amount for which you can qualify. This step is called pre-qualification and can save you time and trouble by making certain you are looking in the correct price range.
Having the items listed below on hand when you visit the mortgage company will help speed up the application process. After the initial meeting with the mortgage company, you should have a general idea if you qualify for the size and type of loan you want. After the mortgage application, the mortgage company should let you know if you qualify for the loan within days.
Items your lender will need:
- A purchase contract for the house (if you have one)
- Your bank account numbers and the address of your bank branch, along with checking and savings account statements for the previous 2-3 months
- Pay stubs, W2 withholding forms, tax returns for two years, or other proof of employment and income verification
- Credit card bills for the past few billing periods, or canceled checks for rent or utility bill payments, to show payment history and amount of revolving debt
- Information on other consumer debt such as car loans, furniture loans, student loans and retail credit cards
- Balance sheets and tax returns, if you are self-employed
- Any gift letters, if you are using a gift from a parent or relative or other organization to help pay the down payment and/or closing costs. This letter simply states that the money is in fact a gift and will not have to be repaid.