Even though credit may be tight, there are an amazing number of choices when it comes to obtaining a mortgage. How can you tell which one is right for you?
Whether you are purchasing or refinancing your home, it’s important to get the best possible deal for your particular mortgage situation. Mortgages, however, are difficult to evaluate. Even for mortgage professionals, there are so many programs available that it’s almost impossible to keep track. Furthermore, the different lender fees and rates make it difficult to do accurate comparisons. Fortunately, there are new online tools that make that decision easier than ever before.
The quest for the perfect loan begins with finding the right lender. Here are the most common options:
1. Apply directly for your loan to your bank or credit union
The challenge with going to a single lender is that you only have one option. If the lender runs out of funds or has another challenge funding your loan, you now have to start the process with someone else. If you’re purchasing a property, this puts you in a precarious position.
If you fail to fund your loan on time, you may have to cancel the transaction. You can also lose your earnest money deposit. Furthermore, even if you are a preferred customer, a mortgage broker in some cases may give you a better deal than the lender. For example, when I applied to my bank for a purchase money loan as a private banking customer, I thought I would get the best possible deal. It turned out that our mortgage broker obtained a better interest rate and lower fees, from exactly the same bank.
2. Apply through a mortgage broker
The advantage of working with an ethical mortgage broker is that they can offer you a wide variety of loans from different lenders. If there is a problem with one lender, they can take your file to another lender. Also, as mentioned in the example above, they may be able to negotiate better rates and fees than you can by contacting the lender directly.
3. Apply online with a company such as LendingTree
This site requires you to enter your personal information. It is then sent to different lenders. …CONTINUED
Up to four lenders will bid on your request, including LendingTree’s related mortgage lender. The bidding is designed to save you money. When I plugged in my information to refinance a small loan we have on a property in California, the system said, "LendingTree does not refinance loans for less than $100,000."
4. Get multiple quotes from multiple lenders on Zillow.com
Zillow.com’s Mortgage Marketplace offers another option. While online lending sites can require users to fill out detailed information about yourself, including your contact information and even your Social Security number, Zillow’s platform allows you to remain anonymous until you decide which lender(s) you would like to contact, which eliminates unwanted e-mails and phone calls from multiple lenders.
The site does not limit the number of competing loan quotes. The typical borrower who submits their loan request on Zillow receives 15 responses. Those offering responses can view the other competing bids. One of the most difficult aspects of choosing a mortgage is deciding which pricing structure is best for your situation. Does a zero-point loan with a slightly higher rate of interest make more sense than a lower interest rate with a one-point origination fee? Is the lender hiking up the price of your mortgage with what are known as "junk fees?" Zillow requires participating lenders to divulge their rates with all fees included in the pricing, and users can view rate quotes being made to other borrowers in real time.
There is also a filtering system that sorts loans by rate, fees, monthly payment, annual percentage rate (APR), lender rating, and distance to the lender. The rating system can guide users in gauging which participants are delivering the best combination of rates and customer service.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of "Real Estate Dough: Your Recipe for Real Estate Success" and other books. You can reach her at Bernice@RealEstateCoach.com.
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