Finding the best mortgage lender

For most would-be borrowers, the challenge is not in finding a mortgage lender, but in sorting through the throngs of banks, online lenders, mortgage brokers and others eager to take your loan application. How do you choose which one will offer you the best deal, and competent customer service to boot?

Cut through the thicket by shopping broadly and then narrowing your focus as you learn more about what type of lending environment makes you most comfortable. Begin to familiarize yourself with various lenders and the deals they're offering by browsing around the mortgage rates below.

Then take your shopping a step further. Go to the bank or credit union where you already have a checking or savings account and ask what types of mortgage deals they offer current customers. And be sure to ask friends and family members for referrals to loan officers and mortgage brokers who gave them good, professional service and helped them find the most competitive loans.

Always keep in mind that, not only are you buying a home, you are buying a very expensive financial product -- a mortgage loan. In fact, if you were to take out a mortgage for $300,000, at 6.25 percent interest and keep that loan for the full 30 years, you would end up spending nearly $365,000 in interest alone! You deserve to be treated as a very special customer when you're spending that kind of money.

DIY or hire a broker?

One important decision will be whether to pursue a mortgage on your own or to use the services of a mortgage broker. While a good mortgage broker can shop your loan among several lenders, it's important to understand that brokers don't have special access to deals that are unavailable elsewhere. And a broker is not obligated to find the deal that is best for you. Some have been known to pair a borrower with the mortgage that offers the broker the greatest profit, instead of the lowest cost to the borrower.

Before working with a broker, take the time to talk with two or three of that broker's most recent clients. Ask if they received the same type of loan the broker promised, if the costs were in line with their expectations, if interest-rate lock-ins were obtained without delay and if the closing was smooth and on time. Even if you decide to work with a mortgage broker, your time spent shopping other lenders will help you judge whether the product the broker comes up with is indeed the best deal for you.

Talk with your real estate agent

Always ask your real estate agent for recommendations to good lenders. Even though some brokerages have their own in-house affiliated mortgage lending businesses, good agents will not limit their referrals to just that in-house lender. And because agents direct business their way through boom times and slow times alike, smart loan officers take good care of the clients sent their way by local real estate agents.

David Reed, a mortgage banker in Austin, Texas, and author of "Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You," says, "Good Realtors keep a short list of good lenders and do that not because of referral fees, which are illegal, but because they trust these loan officers to be fair and to get their loans to close on time." Most can offer you the names of two or three lenders with whom they've had good experiences.

Reed does not recommend that consumers buying new homes automatically apply for a mortgage with the lender recommended by the builder, even though builders may offer significant incentives (such as free upgrades) for doing so.

"Get a quote there," he says, "but don't automatically think you're going to get the best deal there." If that lender is charging high fees or a noncompetitive interest rate, that could easily wipe out the value of the builder's incentives.

Unfortunately, no matter how much thought and research you put into choosing the right source for your mortgage, you may eventually end up having your monthly payments handled by an entirely different institution. The right to "service" your loan, that is to collect payments and manage your escrows for property taxes and homeowners insurance, is often sold to other institutions shortly after the loan has closed. Borrowers have no say in the matter; you simply will receive a notice through the U.S. mail from the old and the new servicing companies directing you to send your payment on to a new address. The terms of the mortgage itself will not change.

Even though you may not be able to choose a partner for a long-term mortgage relationship, it is well worth your time to shop carefully for a lender who will patiently explain all the terms of various mortgage products to you, handle your application competently and efficiently, and, not least, who will offer the most competitive loan terms.


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Claes Bell

Mortgage rates in Los Angeles

See this week's average rates for the 30-year fixed-rate mortgage, 15-year fixed-rate mortgage, 5/1 ARM and 30-year jumbo mortgage in Los Angeles.  ... Read more


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