Selecting a Lender for Your Home Loan

A lot of your financial futures rides on your home loan. Shopping for a lender, therefore, is a critical piece of your long-term financial puzzle. You can go with national, trusted brands, such as large banks, multi-state savings and loan institutions, and brokerage services.

Alternatively, you can shop locally and create a personal connection with a lender in your area --someone who knows the needs and obligations of people buying in your price bracket and neighborhood.

Should you utilize a mortgage broker to locate a lender for you? If you are strapped for time, and if you don't want to delve knee-deep into the logistics and subtleties of financing, a mortgage broker may be a good conduit for you. However, don't put your mortgage entirely in the hands of an arbitrary third party -- even the most dedicated broker doesn't have the same kind of vested interest you do in the ultimate outcome of the borrowing plan.

The type of lender you choose should also be influenced by the kind of mortgage product you want. If you're looking for a standard conventional fixed 30-year product, for instance, and you have relatively good credit and a stable income, the vast majority of lenders out there should be able to help you.

If you have poor credit, unusual income circumstances, jumbo buying needs, or a complicated financing plan in mind, it may behoove you to work with a more specialized lender. Once you've narrowed the field, you can compare lender offers through internet sites or through referrals.

Does it help to go to a dozen or more lenders at once, and hopes that by “throwing everything against the wall” you'll find a terrific person who will deliver top-shop service? Actually, there is a tipping point, beyond which it's actually counter productive to go to additional lenders.

Most industry professional believe homeowners should only have to shop four or five different lenders -- provided that they have done good groundwork early on. Ask questions of your lenders. Find out what they construe an “APR” to be. Some lenders gather together a large assortment of fees into the APR, while others take a more bare-boned approach to this metric.