I started my career 10+ years in real estate as a mortgage broker and aside from mortgage lenders getting more conservative in their lending qualifications, not much has changed.
So I’m going to give you some key tips to picking the right mortgage lender or bank when buying your home or condo that will save you thousands of dollars and keep you from getting scammed.There are basically 2 types of mortgage lenders to get your home loan through:
1) Direct Lenders or Banks
2) Mortgage Brokers
If you go through a direct lender or bank such as Chase or Bank of America, they will only give you the mortgage rates and fees from their own bank, which may or may not be the lowest rates and fees you can get in the market.
With a mortgage broker, they have relationships with multiple mortgage lenders and banks (sometimes 100+) so they can shop for the lowest interest rates and closing costs for your home loan.
Initially, you’d think using a mortgage broker would be best but that’s not always the case because getting the lowest mortgage rate is not the only factor to consider. You’ll also be paying closing costs and those can vary greatly between mortgage lenders.
Both types of mortgage lenders are either paid on a salary or salary plus commission. Their commission comes from the rates and closing costs they give you. The higher the mortgage rate, the more commission they earn.
Mortgage brokers will usually add mortgage origination fees or closing costs that either their company charges or that are paid directly to the mortgage broker as commissions.
So how do you know who’s giving you the best home loan? Here’s the magic word you need to use: Good Faith Estimate.
A Good Faith Estimate, also known as a ‘GFE’, details the mortgage rate and closing costs that you’re being quoted. Both mortgage brokers and direct mortgage lenders are able to give you a good faith estimate and are actually required to do so at a certain point in the mortgage application process.
When you compare a good faith estimate from a mortgage broker and direct mortgage lender, you’re able to see who’s giving you the lowest closing costs and who’s giving you the lowest interest rate.
(keep in mind, the interest rate is typically not ‘locked in’ until you have a home you’re buying ‘under contract’)
Once you’ve compared good faith estimates from multiple mortgage lenders, you can then have them fight over each other to give you the best home loan! Simply tell each mortgage broker or lender what the other guys are quoting you and ask them if they can beat it.
In many cases, you’ll find them lowering their closing costs and even the mortgage rate. This tactic ensures you get the absolute best deal on your mortgage and helps you find the best mortgage lenders when buying your next home.
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