How to Choose Your Real Estate Lender
Author: Jeanette Joy Fisher
Because you need quick action when applying for a real estate purchase loan, find a lender you can access easily. A lender's quick response signifies good service to follow.
Once you know your middle credit score, look for a lender appropriate to your specific needs. When ready to make offers to purchase, apply for credit with lenders. Choose at least three lenders to apply with and do it at the same time. Call all your prospective lenders during the same week. This counts as only one inquiry on your credit report. Credit bureaus expect borrowers to shop for a loan.
The best way to find a good lender is to ask a real estate investor for a referral. Also, escrow officers and real estate agents know lenders who close loans efficiently in a timely manner. Avoid advice from agents or others who receive a kick-back commission for referring you, because you may pay for this referral with added charges to your loan.
Lender's Checklist
Ask potential lenders about the following requirements and costs according to a price range you think matches your needs. This also helps determine what you need to look for in a property.
1. Qualifications:
Middle credit score
Income
2. Loan costs:
Points
Processing fees
Additional "garbage" fees (underwriting fees, loan documentation preparation fee, filing fees, credit report)
Hidden costs
Prepayment penalty
Interest Rate
PMI (mortgage insurance)
Are loan costs added to loan or prepaid?
Is the seller allowed to pay a percentage of nonrecurring closing costs for the borrower?
What is the maximum allowable seller contribution?
3. Requirements:
Percentage of purchase price required down? Or loan to value ratio?
What about the condition of the property? Do they finance "fixers"?
A Better Way to Find Your Lender
After you work through all the details of the lender's checklist, you understand better the available possibilities. Now, from a different point of view, work backwards. Instead of asking the lenders what they offer you, tell them what you want and find the lender who best matches your terms. Create your own wish list of your personalized loan needs.
Personalized Borrowers Lender Checklist
Is this purchase an owner-occupied or an investment property?
What percentage do you want to put down?
If you want to sell right away, can you avoid prepayment penalties?
Do you need the loan to finance a fixer? How much of a fixer do you want to tackle?
How flexible are the lender's appraisers? Do you need a cooperative appraiser?
Do you care about "garbage fees" and need costs to be added to the loan?
Do you want to pay PMI, or a first and a second, or neither?
Do you want the seller to contribute to your closing costs?
How much do you want the seller to contribute?
How many points do you agree to pay up front or add to the loan?
Are super low payments available?
Make your own checklist according to your abilities and find the lender who comes closest to your needs. Remember, a good mortgage broker wants your business and works hard to find the right loan out of thousands to best suit your requirements. However, asking a lender for impossible demands wastes your time and theirs.
Notice the difference in real estate loan requirements, loan costs, and lender's attitudes. Figure out your qualifications, your loan needs, and find a matching lender with first-class service.
(c) Copyright 2004, Jeanette J. Fisher. All rights reserved.