How do I select a lender?

Don’t take your lender selection for granted. Here are some things to consider in selecting a lender and a loan officer:

Reputation – here are literally thousands of lenders from which to choose. Just because you’ve never heard of one doesn’t mean they aren’t reliable. If you are considering a smaller company, do your homework. How long have they been in business? Are they a member of the Better Business Bureau or the local Chamber of Commerce? If you are considering a larger “brand name” lender, chances are you know someone who has worked with them or you have seen their advertising. Ask yourself – what is their main business? Is their core vision, goal and focus mortgage lending? Read the press, canvas your friends and family to assess the experience that other home buyers have experienced.

Service – buying your home is one of the most important financial decisions you will ever make. Searching for that perfect home is part of making your dreams come true. The application to closing process should positively support the quest. It’s a complex process – you want to feel comfortable that your lender is educating you, communicating with you, and doing everything possible to make the process as transparent and stress free as possible. Once you’ve made contact with a lender, what was your first impression? Did they ask you questions about your goals, your budget, how long you anticipate staying in your next home? Did they answer your questions thoroughly and without industry jargon? Did you feel pressured to submit an application before you were ready or before they completed a full consultation with you?

Products and price – Most mortgage companies offer similar types of mortgage products. It’s easy to default to a product that is common and the most popular: 30-year fixed rates or basic adjustable-rate mortgages. Product selection is very important and should be specific to your unique situation. If your loan officer is asking you questions about your lifestyle, your budget, your financial goals and presenting you with several loan options, then you have a good indication you are in good hands. Answers to those questions help the loan officer prepare and present loan options that best fit your needs and circumstances.

What is the purpose of a credit report and credit score?

An important key point that your loan officer considers when helping you decide which lender/program is best for you is to view your credit. The purpose of this report is to pull your credit history from each of the three major credit-reporting agencies: Equifax, Experian, and Trans Union. Your lender is required to use outside companies to acquire your credit report, as they are impartial to the findings on your credit report. Your account balances and account history on your report are verified. Then the credit reporting agencies assess a “credit score” based upon the credit report.

How is my interest rate determined?

Credit rating – Your credit score is the most important point in mortgage lending. The credit score is not the only aspect considered in lending, however in most cases it is the most crucial. Lenders also look for multiple late payment occurrences over the last two years.

Ratios – Secondly, your monthly obligations (this does not include utilities, phone, or items generally not reported on a credit report) are calculated and reviewed by lenders. Two ratios are determined, front-end and back-end. For most lenders, a “grade A” conventional loan is one in which a borrower has a front-end ratio less than 28% and a back-end ratio less than 36%.

Down payment – Thirdly, the lender factors in the amount of your initial down payment. The less money spent on the down payment means a higher interest rate charged by the lender. Simply stated, more risk for the lender equals a higher rate for you. Even if a borrower has perfect credit and wants to put 0% down, their rate will generally be about ½% higher than a person who puts 10% down.

What are discount points?

Lenders generally charge discount points for the following purposes. 1 discount point equals 1 percent of the loan amount. Discount points are used to lower the interest rate. The discount fee is normally charged as a line item on your HUD or settlement statement at the time of closing.

How much will I need for closing costs?

How much will I need for closing costs? Your closing costs depend on the type of loan you and your Great Western Loan Officer decide is best for you. Depending on your home state, you normally pay the following amounts.

Origination Fee – 1% of the loan amount – cost of establishing a loan

Discount Points – Used to lower the interest rate (refer to Discount Points section above)

Appraisal Fee – Dependent upon the house size

Credit Report Fee – Charge for pulling your credit report from the credit bureaus (Refer to Credit Report question in this FAQS section)

Underwriting Fee – Payment to the end investor for services provided

Processing Fee – Payment to the lender for services provided

Flood Certification Fee – Certification that your property is not in the 100 yr. flood zone

Title Charge – Payment to the title company for closing your loan

Title Policy – 1% of purchase price depending on the state (the seller normally pays)

Recording Fee – Payment for filing fees depending on the state

Many of these costs are third party charges and cannot be negotiated by you or the lender.

Origination Fee – 1% of the loan amount – cost of establishing a loan

Discount Points – Used to lower the interest rate (refer to Discount Points section above)

Appraisal Fee – Dependent upon the house size

Credit Report Fee – Charge for pulling your credit report from the credit bureaus (Refer to Credit Report question in this FAQS section)

Underwriting Fee – Payment to the end investor for services provided

Processing Fee – Payment to the lender for services provided

Flood Certification Fee – Certification that your property is not in the 100 yr. flood zone

Title Charge – Payment to the title company for closing your loan

Title Policy – 1% of purchase price depending on the state (the seller normally pays)

Recording Fee – Payment for filing fees depending on the state

Many of these costs are third party charges and cannot be negotiated by you or the lender.