Home loan borrowers understandably place a lot of emphasis on monthly mortgage payments. Questions like: “How much will we have to pay? And could the payments increase?” typically merit more attention than questions like “Which lender will originate my loan? And who can I call if I have any questions?”
Yet the relative merits of the lender are well worth consideration even though they aren’t directly related to your monthly payments. That’s because your lender will have a significant impact on your experience throughout the loan process and after your loan closes.
Service. Borrowers who appreciate and value good service as well as reasonable prices should pay attention to the services the lender promises to provide. Choose a lender who is responsive to your requests and who answers your questions completely, patiently and in plain language that you understand. Ask the lender what services he or she is ready and able to offer to you, and ask yourself whether you feel comfortable with the lender and loan representative.
Products. Most lenders originate all types of home loans, but some specialize in loans that meet the needs of certain types of borrowers. Find out what expertise the lender has and what types of products the lender most often recommends to borrowers in your situation. Ask your loan representative how he or she will help you figure out your needs and select a loan product that will be suitable for you. Pay attention not only to the initial monthly payment, but also to how your payment could change over time.
Costs. Monthly payments are only one component of how much a home loan costs. Ask the lender to explain the other costs and pay attention to the annual percentage rate or “APR.” Lenders naturally are entitled to earn fees for loan-related services, yet those fees should be fair and reasonable. Some lenders offer discounts or waive certain fees for existing customers, so ask whether any discounts or special offers may be available to you.
Servicing. Some lenders keep home loans on their own books while others sell the loans or the servicing rights or both. The sale of your loan and/or the servicing rights isn't a cause for concern; however, you may want to find out the lender’s intentions, so you’ll know who will own your loan and where you’ll need to send your monthly payments. If the lender sells your loan before closing, another lender’s name and address may appear on your loan documents.
Performance. Circumstances in which a lender gives final approval to a loan, but then fails to come up with the promised funds are very rare. Yet that unusual situation can happen. Choose your lender with care, stay involved in the loan process and keep in touch with your loan representative to make sure your loan will be funded on time.