Shopping for Your FHA Mortgage
Recent studies suggest that it takes three to four mortgage quotes to get the best deal on a mortgage, and that borrowers can save at least a thousand dollars in mortgage fees by shopping with several mortgage lender. Because it’s so easy to get quotes from lenders online, a few clicks could save you thousands of dollars in upfront mortgage costs. You can also obtain mortgage quotes by calling around or by visiting lenders in person.
Questions for Mortgage Lenders
When comparing mortgage lenders, ask them these questions:
- Are you licensed to do business in my state?
- Are you FHA-approved? Only FHA direct endorsement lenders can approve FHA loans without prior submission to FHA (HUD). They take your application, underwrite your loan and fund it. They can also get a condo project FHA-approved. Direct endorsement lenders must comply with fairly strict guidelines set forth by HUD. These guidelines include HUD’s review of the company’s experience, lending practices, and financial strength. Non-approved lenders can take your loan application, but then they have to forward it to an approved FHA lender with whom they have a business (also called correspondent) relationship. For you, that’s an additional layer between you and your mortgage.
- Will you give me a written quote on a Good Faith Estimate? Ask for written quotes on Good Faith Estimates (GFEs), not just worksheets. Worksheets do not obligate lenders the same way that GFEs do.
- Do you apply overlays that affect me? As mentioned in the section on qualification, many FHA lenders impose minimum requirements that are stricter than FHA’s minimum requirements. If you know your credit score is 600, don’t waste time with lenders that require 640 FICOs.
Finding a Good Loan Officer
Chances are, the quality of your mortgage experience will depend on the expertise, personality and work ethic of your loan officer. The price of your home loan is of course important, but so is the excellence of your loan officer or mortgage broker. Before committing to a lender, check out the Lender Ratings and Reviews section of this site. Or read the guidelines below.
GOOD Loan Officers
- Return your calls. Within an hour in most cases.
- Explain. If they recommend a mortgage loan product, they can tell you why it's the best one for you, detailing programs and lending terms in plain English.
- Offer choices. In most cases, more than one kind of loan will work for you. A good loan professional offers alternatives, gives you the pros and cons, and helps you make the best choice for your situation.
- Ask questions. The right loan depends on many things. How long do you plan to keep the property? Do you expect increases or decreases in income, such as college graduation or retirement? Does your income fluctuate? Are you a risk-taker or do you want to feel safe even if it costs more? If your agent doesn’t ask questions, find one who does.
- Consider your comfort. Do you prefer to get your loan documents early and review them at your convenience? Would you like your loan officer to attend your closing? Do you want detailed explanations, or do you prefer to "cut to the chase" and limit your involvement? Your loan agent's work style should reflect your preferences, not his or hers.
- Think on their feet. Your credit report came in with an unexpected blemish. The property appraisal came in at a lower value. The program you wanted was discontinued. An underwriter has a question about your commissions and bonus income. Most loans get at least one monkey wrench thrown into the process at some point. A good loan agent anticipates these possibilities and solves the problems.
Because the success of your home loan depends so much on the skill and character of your loan officer, it's critical to avoid bad ones. Bad loan agents are more than just an annoyance--they can cost you serious money, give you ulcers, and turn your hair gray. So look for these red flags when shopping for a lender, and avoid the turkeys:
BAD Loan Officers
- Pull disappearing acts. They're playing squash when you call, and they don't call you back.
- Push the same loan on every client. If you tell your agent that you have 20 percent down and plan to sell up in five years, she’d better have a great reason for suggesting a 30-year fixed FHA mortgage.
- Don't care about your comfort zone. They push you to borrow more than you’d like or bully you into riskier loans than you want. If you get the feeling that your loan officer and your real estate agent are tag-teaming you, they probably are. Replace them BOTH and find someone you can trust.
- Are unhelpful. They hand you a stack of paperwork and expect you to be their secretaries. They make weird requests--for the juicy details of your messy divorce or a letter from your CPA about your Tupperware parties. These can be legitimate underwriting requirements, but you should be told why they are needed.
- Don't communicate. They change your program or rate without consulting you. They don't explain the disclosure forms. Or they hide behind jargon, explaining, "Well your rate is higher because your LTV requires an underwriting exception and the doc draw was delayed so we blew the lock." Yikes.
- Don't know. Agents who don’t understand the special ins and outs of FHA lending can't do a good job for you, however motivated or nice they may be. While many learn from their mistakes and eventually become good loan officers, you don't want to be the mistake they learn from, do you?
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