Choosing a Lender

While real estate markets may in in flux elsewhere, in Scarsdale and Edgemont we've seen that they have been quite robust in recent days. With more homes selling in these communities, buyers must decide how they wish to proceed in paying for them.

In addition, there are many homeowners in the area who have been thinking about refinancing, and if they have not already done so, now is the absolute best time.

Mortgage rates have fallen to the lowest level on record since Freddie Mac began tracking them in 1971, giving consumers added incentive to lock in low payments for home purchases and refinanced loans.

The average rate for a 30-year fixed loan is now 4.77 percent.

Rates for 15-year and five-year mortgages have also hit record lows.

With the banks now practically giving the money away, the importance of choosing a good mortgage lender is a point which cannot be overstated. Just as choosing the proper loan program is essential to your financial well-being, selecting a good lender can go a long way toward saving you thousands of dollars and untold hours of anxiety.

Not to mention, choosing the wrong lender could, in the end, cost you the home you have been working hard to purchase.

Finding the right lender is not as complicated as you might think though- you just have to do a little homework.

Mortgage Broker: A mortgage broker is an individual that is going to connect you with lenders. You do not actually receive the loan from the broker, they are simply acting as a middleman in helping you to find the best loan that fits your needs. Brokers have the ability to obtain loans from multiple different banks. In many cases, they are paid by the lender.

Loan Officer: The loan officer is actually employed by the bank or the lender that you are working with. The mortgage broker may have referred you to this lender, and then you are going to work with the loan officer to apply for the loan. You will fill out your application, and the loan officer will help you with any questions that you might have about the process. They will review your application, and help determine if you qualify for the loan.

Mortgage brokers differ from the traditional mortgage bankers in that brokers do not fund or even approve any type of financing. Whereas mortgage bankers will approve or disapprove your loan application and also fund the loan, the broker's job is to match prospective borrowers and lenders together according to their needs.

Because not all lenders offer the same loan programs, a broker will usually have affiliations with several different lending entities. This generally makes it much easier to find a suitable loan that's tailored to your individual needs through a mortgage broker, especially if you have less-than-perfect credit.

Online Mortgage Brokers: Another option that you might consider. But buyer beware, many of these online brokers are unknown and local experiences have not been very positive. If you are thinking about using an online broker, be sure to check their reputation and track record. Obtain referrals from someone who has already used them successfully.

Many online brokers offer speed and convenience. By filling out one application or request for a quote, several lenders will contact you with an offer. Another advantage of this system: your credit is pulled only once during this process. (Several credit inquiries in a short period of time can damage your credit score.)

Be sure to get pertinent information about the loan, such as interest rate and annual percentage rate (APR). How many points will you be required to pay? What are the closing costs? How long will it take to process the loan, and what's the lock-in policy for the interest rate? Is there a prepayment penalty? Does the lender have a first-time buyers program? What is the lender's track record on closing loans?

Loan Origination Fees: These fees are charged to compensate the bank for their services. The bank has to review your information and send it to an underwriter in order to make a decision about whether they should do business with you. This process requires them to utilize resources, and they need to be compensated in order to continue providing this service to potential borrowers.

Points: In some cases, you are going to have to pay origination points on your loan. Instead of a flat fee, they will charge a certain percentage of the loan amount. In many cases, one point is going to cost 1 percent of the loan value.

This should not be confused with discount points on a loan. A discount point is a type of prepaid interest that is designed to lower your monthly payment. This is strictly to compensate the lender.

As always, the key is to gather as much information as you can, both about the lender and the programs that they have to offer. Once you've done your homework, you'll be well able to choose a lender that, as a standard of business, will not overcharge you and will treat you as a valued customer.