 Picking
a mortgage lender
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 Dear
Dr. Don,
Where is the best place to acquire financing for a new home? I understand
fully that I should find out first how much I may qualify for prior
to beginning the home search. I was just wondering if I should utilize
a mortgage broker, bank or any lender. Thanks.
-- Chuck Choices
 Dear
Chuck,
Mortgage brokers are always the first choice for story loans, meaning
borrowers have to sell the lender on their situation in order to
get the loan approved. A mortgage broker can do a better job in
finding financing for you in these situations than you can do for
yourself. If you go this route, I recommend that you find a mortgage
broker that holds themselves out as an upfront mortgage broker,
a term coined by Jack Guttentag, "The Mortgage Professor,"
and explained in greater detail in a Bankrate feature, "Want
your mortgage wholesale? Try an upfront broker," written
by the professor.
If you have good credit, a good income and aren't
looking to do anything too exotic in building or financing your
home, it's my opinion that you don't really need the services of
a mortgage broker. You can shop
rates in your market on Bankrate and be able to compare lenders
without filling out multiple loan applications.
Keep in mind that the mortgage market is divided into
three pieces: mortgage origination, mortgage loans and mortgage
servicing. Mortgage origination takes you to closing, the mortgage
lender provides the funds at closing and the mortgage servicer manages
the loan payment stream. It's common for different financial institutions
to specialize in one aspect of mortgage lending and uncommon for
originating lenders to keep your loan in their investment portfolios.
The originating lender may sell both the loan and
the servicing. The Real Estate Settlement Procedures Act requires
a mortgage servicing disclosure statement, delivered to the homeowner
during the loan application process, which discloses to the borrower
whether the lender intends to service the loan or transfer it to
another lender. The statement also provides information about complaint
resolution.
I don't have much to say about private lenders. Shopping
for private loans is most likely to come about if you're working
with a mortgage broker to find your loan. The FTC's Facts for Consumers
guide, "Looking
for the Best Mortgage," and the mortgage
shopping work sheet provided in that guide are both good tools
to use in comparing your loan choices. Good luck.
To ask a question of Dr. Don, go to the "Ask
the Experts" page, and select one of these topics: "financing
a home," "saving & investing" or "money."
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