Before You Choose a Mortgage Lender, Read These Tips

Someone out there wants to help save you time, stress, and money. Here’s how you find them.

Image: HouseLogic

Everyone in the market for a house has different wants — pre-war charm, a lush backyard, a welcoming front door in Pantone Ultra Violet, perhaps — but at the end of the day, they all share a need in common: money. Lots of it.

That’s where your mortgage lender comes in.

The right lender can save you time, anxiety, and loads of cash. And the right loan officer — the professional who represents the lender — can be a powerful ally when you close on a mortgage. As with any potentially life-altering partnership, it’s important to choose wisely.

Only You Know Which Lender Is Your Type

There are three types of mortgage lenders — retail banks, credit unions, and mortgage banks — as well as mortgage brokers, who compare loan products via a coterie of potential lenders to help you, the client, find the right one. Before you start narrowing down the candidates, you have to know what you’re looking for, and where to find it. Let’s talk about your options. 

Retail Banks

What they are: These are your Chases and Banks of America, plus your local banks. They do their own underwriting (in a nutshell, investigating your finances), so retail banks, especially the smaller ones, can sometimes offer lower fees and less-stringent credit requirements. If you like to have your accounts all in one place, you may want to use your own bank or credit union. 

Who you’ll work with: You’ll be assigned a loan officer, who will receive a commission or bonus for writing your loan.

Credit Unions

What they are: They’re not-for-profit and customer-owned, so they’re not beholden to shareholders like a bank. Because of that and their not-for-profit tax status, they typically offer more personal service and lower fees. The flip side is less convenience: They have fewer branches and ATMs. 

And to apply for a loan, you must be a member of the credit union’s community, which could be faith-, employment-, interest-, or union-based, among other things. That said, it’s typically not difficult to become a member; the National Credit Union Administration’s Credit Union Locator is a tool for finding credit unions near you. 

Who you’ll work with: As with a bank, you’ll be assigned a loan officer, who will receive a commission or bonus for writing your loan.

Mortgage Banks

White-Glove Treatment or Lower Rates?

Getting in touch with an online lender may be more difficult than with traditional lenders. If you’d prefer more hand-holding, consider whether online lenders’ often lower rates and fees are worth the tradeoff.

What they are: These banks, such as AimLoan and PennyMac, only offer home loans. Many online lenders, like Rocket Mortgage by Quicken Loans, operate as mortgage banks.

Who you’ll work with: A mortgage bank will assign you a loan officer, who will receive a commission or bonus from the lender’s gross fees for writing your loan. An online lender is going to offer less hand-holding.

Mortgage Brokers 

What they are: Mortgage brokers are essentially personal home loan shoppers — they act as liaisons between home buyers and mortgage lenders to help people find the lowest rates and the best mortgage terms. They’re able to get home buyers the best mortgage rates because they leverage their existing relationships with lenders — something individual home buyers can’t do. By doing the heavy lifting for the borrower, the idea is that they make loan shopping more convenient — and perhaps a bit faster. 

Who you’ll work with: A mortgage broker can be an individual agent or a group of agents, who act as independent contractors. In exchange for their services, mortgage brokers typically charge a 1% to 2% fee of the loan amount, which is either paid by the borrower or the lender at closing.

Now that you’re armed with the basics, you’ll want to give yourself time to weigh the options about which lender, exactly, to work with.

It Pays to Shop Around Before You Commit

Over the life of the loan, seemingly subtle differences could add up to tens of thousands of dollars. That money belongs to future you and all your dream vacations, renovations, and remodeling #goals.

So before you choose your specific lender …

• Thoroughly research any retail bank, credit union, mortgage bank, mortgage broker, or online option you’re considering. Make sure you’re clear on what they can offer you. About one in five (21%) home buyers said they regret their choice of mortgage lender, according to a J.D. Power survey. You’re doing your homework so that won’t be you.
• Interview lenders. You’re aiming for a shortlist of three. (You’ll see why it’s three in a minute.) If you’re thinking about selecting an online lender, make sure you take into account these tips and tricks.
• Don’t be shy about seeking advice. Survey your family, friends, and coworkers —  especially the ones who are nerdy about money.
• Ask your real estate agent for a second opinion. They have experience with reputable lenders, particularly in your city or town.

Now, let’s say you’ve narrowed your list of potential lenders to at least three candidates. The next step? Finding out whether they will give you a loan.

You Should Seek Out a Lender’s (Pre-)Approval, Too

There’s a world of difference between being pre-qualified for a loan and being pre-approved. Pre-approval means you’ve got skin in the game. It means you’re a boss. And it’s proof that you can buy.

Besides being the grown-up thing to do, pre-approval puts you in a better position when you make an offer. Everyone takes you more seriously. Pre-approval provides evidence to your real estate agent and the seller (or seller’s agent) that a trusted financial institution is willing to finance the purchase.

In most housing markets, sellers are going to expect your to be pre-approved when you make your offer. And when you’re pre-approved, you’re more likely to have your offer accepted — or at least, you won’t lose out on a bid because you have to go back to the bank to get approved for a loan.

As for pre-qualification, it’s an approximation and not necessary unless you have no clue about your creditworthiness and just want a snapshot.

By contrast, with a pre-approval, a lender typically goes deeper and tells you more specifically how big a loan you can get. Caution here: Just because the lender says you can take out a loan for an amount, doesn’t mean you should. Consider your lifestyle and monthly budget to decide on the responsible loan amount for you. 

Keep a Lid On Credit Pulls

Lenders pull your credit to pre-approve you, which can ding your score. But don’t let that hinder your comparison shopping; credit bureaus cut mortgage shoppers some slack. Still, this isn’t the time to apply for a car or furniture loan.

To get pre-approved, you must also authorize a lender to pull your credit. 

• Borrowers with credit scores of 760 or higher can typically qualify for the lowest interest rates.
• Borrowers with credit scores below 650 may need to apply for a non-conventional mortgage, such as a Federal Housing Administration (FHA) loan — a government-backed loan that requires a minimum credit score of 580 but lets borrowers make as low as a 3.5% down payment.
• Borrowers with credit scores below 580 can still qualify for FHA loans, but they’ll have to make at least a 10% down payment. The lower the score, the tighter the requirements become.

When you’re pre-approved, you’ll receive a Loan Estimate. This three-page document is about to be your new best friend.

It Makes Good Sense to Get Pre-Approved by at Least Three Lenders

A Loan Estimate spells out a future loan’s terms, including:

• The interest rate
• The length of the loan
• Estimated costs of taxes and insurance
• How interest rates and payments might change over time
• Other important financials

By comparing loan estimates, you can effectively size up your loan options and decide which lender is best for you — and your future. (If you need help navigating the details, the Consumer Financial Protection Bureau offers a sample Loan Estimate with helpful tips and definitions.) 

Getting pre-approval early in the process also gives you an edge over other buyers. Here’s why: 

• The amount you’re approved for can help you determine your price range, and thus save time and frustration when shopping.
• It sends a signal to your agent and sellers that you’re serious about buying a home.
• It’ll help you move quickly to make an offer when you see a home you like.

And it’s an excuse to celebrate! You now have everything you need to move ahead with that one special lender — and, at the same time, connect with an officer or broker who can help you select the home loan product that’s best for you. 

So have a cocktail. Do a dance. Lay back and relax in one of those fancy sheet masks. You’re a (huge) step closer to getting a new house.

HOUSELOGIC

HouseLogic helps consumers make smart, confident decisions about all aspects of home ownership. Made possible by REALTORS®, the site helps owners get the most value and enjoyment from their existing home and helps buyers and sellers make the best deal possible. 

12 Questions You’ll Wish You Asked Before You Moved In

Avoid regrets by knowing what questions to ask a REALTOR® or owner before you commit to a new home.

Image: IanRedding/Shutterstock

If you bought a house with no maintenance issues big or small, let us know. That would be one for the record books. In reality, most homeowners find a problem, quirk, shortcoming, whatever, within the first couple of months.

To actively ferret out your home’s trouble spots and head off headaches, know the right questions to ask before you buy. That doesn’t mean potential problems go away, but you’ll have eyes wide open and can adjust your budget accordingly.

And if you’ve already settled in, getting answers to these key questions will help you get to work putting the shine on your castle. Ask the previous owner, your agent, and your new neighbors for helpful answers.

#1 Has There Ever Been a Busted Pipe?

A broken pipe isn’t rare; in fact, water damage caused by a frozen or burst pipe is a leading cause of homeowners insurance claims, at around 22% of all home insurance losses, according to the Insurance Information Institute.

What bursts? Typically exposed water pipes in unheated basements and crawl spaces, along with exterior faucets. 

Another prime suspect of water damage: old washing machine hoses.

A good inspector usually can tell if water damage has occurred, and any damage should be disclosed by the previous owner at the time of sale. Nevertheless, you should:

• Make sure exposed pipes in unheated areas are protected with pipe insulation.
• Install frost-proof spigots on all exterior faucets. The spigots let you put a shutoff valve inside your home so freezing isn’t likely.
• Check that washing machine hoses are in good condition and replace, if necessary, with braided steel hoses with brass fittings ($11 to $18 for a 5-foot hose). They’re much stronger and longer lasting than rubber hoses.

The big fallout from water damage is moisture problems you won’t see — behind drywall and trim — which can lead to mold. If you know there’s been a major leak, a mold remediation pro ($200 to $600) will tell you if mold is present and the steps required to remove it.

#2 How Old is the Roof?

Knowing the approximate age will give you a good idea of how soon you’ll face — and need to budget for — repairs or replacement. A new roof is no small matter: The “Remodeling Impact Report” from the NATIONAL ASSOCIATION OF REALTORS® pegs the median national cost of an asphalt roofing replacement at $7,500.

The most common type of roofing — regular asphalt shingles — needs to be replaced after 15 to 20 years. Here are estimated average life spans for other types of roofing materials:

• Top-of-the-line (architectural) asphalt shingles: 24 to 30 years
• Metal (galvalume): 30 to 45 years
• Concrete tile: 35 to 50 years
• Wood shakes: 20 to 40 years

If you don’t know the age of your asphalt roofing, use these general guidelines to determine if new shingles are in order:

1. Sand-like roofing granules accumulate in the bottoms of gutters and flow out through downspouts, but otherwise the roofing looks in good shape. Inspect for deterioration in spring and fall.

2. Bare spots begin to appear where patches of protective granules have worn away, and the edges of shingles start to curl — a strong signal that you need new roofing.

3. Shingles become brittle and begin to crack and break. You might be able to replace a few. But if roofing nail heads become exposed (that is, they’re no longer hidden by the overlapping shingles), an expensive roof leak is likely.

Tip: Know how many layers of roofing your house has. Most building codes allow two layers (because of weight concerns): the original roofing, and one re-roofing layer over that.

#3 Any Infestations of Termites, Carpenter Ants, or Other Pests?

This should be disclosed by the previous owner at time of sale. But even if the owner dealt with a past infestation — and can offer proof, such as a receipt for pest control — that doesn’t mean the little buggers have been totally eliminated.

Whatever conditions made your house ripe for infestation in the first place — a slow leak under the house, soft rotting wood that attracts insects — may still be present. Plus, many infestations aren’t confined to one house. It may be a neighborhood-wide problem.

Be proactive, because the average cost of a termite extermination treatment around the perimeter of a 2,500-square-foot house is $1,700 to $3,200. Repairs to wooden framing, sheathing, and siding can run from hundreds to thousands of dollars.

You should:

• Ask neighbors about any problems they’ve had with pests.
• Seal cracks and holes around your house.
• Keep attics, basements, and crawl spaces dry and well-ventilated.
• Make sure gutters and downspouts are in good repair, and that the soil around your foundation slopes away from your house at least 6 inches over a 10-foot distance.
• Repair or replace any rotted wood.
• Keep firewood and lumber piles at least 20 feet from your home.

#4 Any Pets Buried in the Backyard?

Image: John H. Gámez

For a grieving homeowner, it can make sense to bury Bosco in his favorite spot under the old oak tree.

On one hand, we sympathize; on the other, it’s kinda creepy. If you didn’t know, you might go out to with a shovel to plant a bunch of hostas. Surprise! You’ve unearthed Bosco.

If you ask this question and the answer is yes, you can:

• Ask where the animal is buried and simply avoid gardening in that spot.
• Ask the previous owner to remove the remains.
• Remove the remains yourself.

If the previous owner refuses your request, you’re not exactly on firm legal ground. Disclosure laws are hazy on this point. Check your state’s disclosure laws.

Most states allow pets to be buried in a yard as long as they’re a prescribed distance from waterways, water sources, and nearby residences (usually 100 to 200 feet); the animal is buried 6 inches to 2 feet in depth; and there’s some sort of precaution (a kitty coffin or a covering of stones would do the trick) so the carcass can’t be dug up by animals. Major cities may not allow any type of pet burial. Aask your county’s board of health and animal control agency for local regulations. 

If you find out there’s a buried pet and want it removed, write a letter to the previous owner requesting removal — and keep a copy. If you decide to go to court, you’ll want a document that proves you made the request. 

Better yet, hire an attorney to draft a letter. A letter from a lawyer commands attention. 

The bottom line: If you drag this all the way to court, it’s probably not worth the aggravation and bad blood. A better solution: Hire someone to dig out the remains and take them away, or do it yourself. Then plant those hostas.

#5 Any Paranormal or Nefarious Activity?

Image: Lori Rossilli-Bush

Maybe for the sake of party conversation, you’re hoping the answer is yes. Regardless, ask. 

Haunted houses fall into the category of what real estate pros call “stigmatized houses” — homes that have been the site of happenings like:

• Ghost sightings and other paranormal activity
• A murder or suicide
• A death due to an accident or unusual disease
• A meth lab

Again, real estate disclosures aren’t consistent. About half of all states have disclosure requirements for stigmatized houses, although most don’t include ghosts. 

If the seller reveals the house to be stigmatized, you’ll have negotiating power. A stigmatized house generally sells for 10% to 25% below market value. 

A meth lab carries the risk of residual toxic chemicals. If you suspect that kind of sordid history but it’s not being disclosed, you can check old news accounts or ask the local police for records of arrest.

You’ll want to ask the seller and your real estate agent directly if you’re concerned about ghosts and ghouls, and check your local real estate laws to get the local lowdown on disclosing paranormal activity.

#6 What are Monthly Utility Costs?

You can’t get away from paying utilities, so know what your monthly budget is up against. Be sure to get an average cost — not the lowest monthly bill — and ask when peak months are. 

While you’re at it, ask what kind of energy sources your house appliances use — gas, electric, propane, or a combination. That’ll help you understand where you might upgrade to energy-efficient appliances to save energy costs. 

Remember that energy savings starts with the simplest of tasks, like sealing air leaks.  

#7 Has the Sewer Ever Backed Up?

As properties age and trees and other plants get bigger, roots find their way into sewer lines between a house and the street, causing clogs. It’s a mess for sure, and most homeowner insurance policies don’t cover damage from backed-up sewers. 

Plan to have the sewer line cleared (about $150) every other year. 

For $40 to $50 per year, you can add an endorsement to your insurance policy to cover damage from a backed-up sewer. 

#8 Is There Documentation on Warranties?

Image: Michelle from Put a Little Shush in Your Home

If the previous owners were conscientious enough to stash warranties and appliance manuals, be sure to get them. 

If you get the paperwork, look for purchase dates on major appliances, so you’ll know how old they are and when they might decide to poop out. If you’re ready to upgrade, you can I.D. which appliances are least energy efficient and target those first. 

Tip: Keep all warranty cards and product manuals yourself. If you decide to sell, those records show you care about your house and become a marketing asset. 

Related: How to Buy Energy-Saving Appliances

#9 How Much Insulation Is in the Attic?

After sealing air leaks and weatherstripping around doors and windows, adding insulation is one of the best ways to gain efficiency and keep your house cozy. 

Knowing how much insulation you have lets you decide if an investment in more insulation is worth the cost. In colder regions, for example, a $1,500 attic insulation upgrade from R-11 to R-49 saves about $600 per year in energy costs, and you’ll see a payback in about three years. 

The U.S. Department of Energy recommends adding more insulation if the thickness of your attic insulation is less than 11 inches (R-30). 

Is the previous owner unsure? Peek in the attic. If the attic floor is insulated and you can see the tops of the ceiling joists, you should budget an insulation upgrade. If insulation was installed between the roof rafters — and you can see the edges of the rafters — you can beef up the insulation by covering over the rafters with rigid insulating foam board. 

#10 How Big is the Water Heater?

To avoid a family rebellion, make sure your water heater is big enough to cover the needs of your household. Here’s a helpful guide from Johnson, Tenn.-based manufacturer American Water Heaters: 

Water Heater Sizing Guide

Family Size	Demand	Gallon Capacity Needed
		Electric	Gas
5+	High	—	75
	Regular	80	50
3-4	High	80	50-75
	Regular	50	40
2-3	High	50	40-50
	Regular	40	40
1-2	High	40-50	40-50
	Regular	30	30

Most water heaters have a life expectancy of about 13 years. A new high-efficiency water heater costs $900 to $2,000, depending on the size and model you choose.

#11 When Was the Last Time the Septic Tank Was Pumped?

A typical septic system should be pumped every three to five years, according to the U.S. Environmental Protection Association. But the number of people in the house can affect that recommendation. We like this chart from septic installer Van Delden in San Antonio, showing about how often (years) you should pump based on capacity. A pumping costs $200 to $300. 

Septic Tank Pumping Schedule

Tank Size	Household Size (Number of People)
(in gallons)	1	2	3	4
500	5.8 yrs	3 yrs	1.5 yrs	1 yr
750	9	4.2	2.6	1.8
1,000	12.4	6	3.7	2.6
1,250		7.5	4.8	3.4
1,500		9	6	4.2
1,750			6.5	5

#12 Will My SUV Fit in the Garage?

Image: Rose Hewitt

It’s a fairly common doh! moment, says Sacramento, Calif., REALTOR® Elizabeth Weintraub. “Many garages are too low to accommodate the height of a big, newer vehicle.” 

Cabinets and workbenches can shorten overall garage space, too, making length an issue. 

With full-size SUVs and trucks nearing 20 feet in length and almost 7 feet tall when equipped with a roof rack, sizing up the garage space is a good idea before you buy. 

Worst case: You buy without checking and come sailing happily home for the first time to discover — too late — your Chevy Suburban is too tall to fit in the garage. 

Knowing everything you can about your home gives you a leg up on surprises, lets you budget smartly, and gives you royal satisfaction with your new castle.

JOHN RIHA

John Rihahas written seven books on home improvement and hundreds of articles on home-related topics. He’s been a residential builder, the editorial director of the Black & Decker Home Improvement Library, and the executive editor of Better Homes and Gardens magazine. 

Before You Move In: A Checklist to Save Hassles Later

Image: HouseLogic

Image: HouseLogic