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As a first-time home buyer, it can be difficult to find a lender that has the right combination of convenience and low rates and fees. Use these tips to choose the best lender.
It can be tempting to go to the bank where you keep your accounts, but you also want to compare other options so you know you’re getting the lowest possible rate and the best term for your situation. Here is an overview of the types of lenders:
Banks: Banks offer banking, investment, and lending products, including loans. You may choose to work with one of the big banks, such as Bank of America or Chase, as a community or regional bank in your area.
Credit Unions: Like banks, credit unions are financial institutions, but you must always meet membership requirements to participate. For example, you must live in a certain area or work in a certain industry.
Non-bank lenders: Sometimes referred to as independent or non-depository institutions, non-bank lenders offer mortgages exclusively or with other types of loans.
Broker: A mortgage broker is not a lender, but an individual or company that connects lenders with lenders.
A broker will compare many lenders and loan options for you and advise you on the best option – an essential service, especially for first-time buyers. Normally, the lender pays the brokerage fee and then passes that cost on to you.
Marketplace: If you don’t know where to start when comparing lenders, an online tool like Bankrate can help you identify lenders and identify trends without jumping between sites.
When comparing mortgage lenders for a first-time buyer, consider the costs first
The interest rate is the rate at which the lender will pay you interest on your loan. APR, which stands for the annual percentage rate, covers the interest and other costs associated with the loan.
The APR is always higher than the interest rate. These two percentages are included in your loan estimate so you can easily compare costs between lenders.
Your card closing costs may vary depending on the lender. For example, some lenders do not pay original fees or may increase or decrease costs. Here is a list of common closing costs:
Beware of extra or excessive fees. That’s why it’s important to compare at least two, preferably three, lenders to figure out what defaults to excess.
Like the interest rate and APR, closing costs are listed in your loan estimate – but in this document, these are only estimates, not definitive numbers.
With so many loan options, due diligence is key. Take the time to compare at least three lenders – and different types – to find out their loan offerings and fees.
Once you find your list, don’t force the loan officer to pre-approve it. Ask what you can expect from the experience.
In the end, it’s best to work with a lender that will give you what you need at the lowest possible rate.
Reference Source: Bankrate
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