6 Tips For Finding The BEST Lender

By Corrie Forcet, Realtor® of The Forcet Group | KW Suburban Tampa

Rates are rising; if you haven't heard. Although your real estate agent plays a vital in your mortgage experience, these days, you and your lender need to become serious BFFs. So what do you need to know about lenders, getting the best rates, and why it matters? Let's start by discussing what is really happening with mortgage loan rates:

Is The "Federal Funds Rate" equal to consumer rates?

Not necessarily. When you hear that the "FED is raising rates!", this does not directly correlate to how much your mortgage lender is going to charge in interest for your loan. Banks, credit unions, and the like set their own rates. The Fed sets the federal funds rate which is an interest rate applied to money that banks and other depository institutions lend to each other overnight. So naturally, as banks are getting charged more for borrowing, they must in turn charge more to lend to consumers. That being said, because lenders have different appetites for risk and different overhead costs, loan rates can and will vary from lender to lender.

Are the differences in rates between lenders significant enough to even matter?

Yes. For starters, a better rate means a lower monthly payment. With lower monthly payments and lower fixed fees, the loan will be more affordable and, thus, safer. Just a 0.5% difference can mean a decrease of over $50 on a monthly premium. Most importantly, however, is the impact of saving throughout the entire course of the loan. Over thirty years, minor variances in interest rates can equal thousands of dollars. It could mean a return on closing costs or the equivalent of three to six months of mortgage payments.

Besides the cash benefits, there isn't a price you can put on consumer care, availability, reliability, flexibility, and knowledgeability. You are financially tied to your lender for the foreseeable future, so why not tie yourself to an entity that provides quality service?

So how do I get the best lender and qualify for the best loan possible?

Tip 1 - Keep Your Finances In Good Condition

Your finances are the first key to excellent rates. If your credit score is not in good condition, you pose a risk to lenders; therefore, they are less capable of providing you with lower rates. On the converse, with a higher score, you'll have more choices of lenders, loan programs and you'll qualify for lower interest rates.

Tip 2 - Determine What Kind of Loan You Can Receive

You may qualify for a VA or USDA loan if you are active military service or a veteran; neither of which requires a downpayment. If your credit score is a problem but you have cash available, you may qualify for an FHA loan. Of course, a loan can vary by terms. A 15-year mortgage will provide lower rates than a 30-year. A fixed-rate loan guarantees your interest will not be affected by increases in the future, but an adjustable rate may increase or decrease after a certain fixed-rate period.

Tip 3 - Ask Your Agent For Referrals

Your agent deals very closely with lenders quite consistently. They can help you narrow down your search using the unique details of your circumstances. Not only are agents familiar with the rates offered by many lenders, but they may also have first-hand experience interacting with and working alongside their staff, providing insight into what kind of experience you may expect to have as well.

Tip 4 - Compare Rates From Multiple Lenders

Although it is only a general estimate, most lenders provide a mortgage calculator that will give you an idea of what kind of rates you can qualify for. Take advantage of these tools to shop around. Lenders may offer to pull your credit score to evaluate your particular rate potential to give an even more realistic estimate.

Tip 5 - Get Pre Approval From Multiple Lenders

Pre approval is your golden ticket for home shopping and shows the seller's agent that you are serious about your search. Also, by having pre-approval from multiple lenders, you can receive loan estimates from more than one bank, which leads us to our final tip. . .

Tip 6 - Get A Loan Estimate From Your Top Two or Three Lenders

A loan estimate is a document a lender provides after you've applied for a loan and have provided certain information, including the actual address of the property you want to buy. The document will spell out important details about your loan, including the interest rate, monthly payment, fees, and estimated closing costs.

This is your opportunity to compare loan estimates from two to three lenders. Read the document carefully, ensuring that all of the details of the agreement are as you expected. Use this time to ask questions about anything you don't understand. Then carefully compare costs and terms to choose the best deal for you.

The bottom line; finding the right lender can be a process, but will literally pay off in the long run. Do not go on the lender hunt alone! Reach out to your agent, tap into their expertise and you will find the right lender for your exciting home purchase!