Choosing the right lender may be as important as choosing the right house. Getting a mortgage means you’re in this for the long haul and the lender you pick may be the one you will be dealing with for 20 or 30 years. The Consumer Financial Protection Bureau conducted a study of the most common ways prospective buyers search and vet mortgage lenders and provided some intriguing insight into the process. Take the advice of the pros and tread carefully when searching for the best home loan.
“Most borrowers consider only one lender before making their final choice.”
The CFPB survey of mortgage borrowers revealed some surprising trends surrounding how people shop and decide on financing for their home. The main takeaway is that borrowers do not consider very many options when looking for a lender. Nearly half of those surveyed said they only considered a single lender in the entire process. However, most prospective borrowers reported they were “very familiar” with their options regarding mortgages and typical interest rates, while those who reported being unfamiliar were less likely to have shopped extensively. The reasons borrowers choose the lender they end up with tend to rely on physical proximity, according to the survey. This means the actual cost of the mortgage is not usually the deciding factor in the typical borrower’s final decision.
Online lenders have become a more popular choice in recent years, sometimes boasting lower fees or near-instant rate quotes. These services can be useful for first-time homebuyers or seasoned real estate veterans alike for numerous reasons. Searching the internet makes comparing different lenders incredibly easy. Many lenders get reviewed by customers on sites like Bankrate or Zillow. This can all be done without an in-person meeting, which takes some of the pressure off and encourages homebuyers to get the best deal possible. Once you’ve zeroed in on the best lender for your needs, you can ask for a face-to-face meeting and get a better read on their practices and service. Real estate agent Anita Clark also recommends ensuring the lender is authorized to do business in your state by checking NMLSConsumerAccess.com. This is a searchable database of licensed real estate lenders and will help you make certain you aren’t being misled.
Where to seek advice
According to the CFPB study, most homebuyers rely on their real estate agent to find a lender and will only solicit advice from that lender. Few homeowners consider the utility of outside, impartial sources on the Internet, financial advisors or even friends and family. An agent or broker can certainly lead you in the right direction of a qualified lender, but they aren’t the only option. As Clark noted in her blog, friends and family tend to give more honest advice and information regarding the rates and customer service reputation of mortgage lenders. You can be sure that when a family member, close friend or even a casual acquaintance recommends a lender, they aren’t going to mislead you. Don’t be afraid to ask how they conducted their own research and take notes on what factors were most important to them when making the decision. If anyone you know has been especially helpful in the process, make sure they know and thank them for their valuable advice.
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