How to Compare Mortgage Lenders
February 4, 2024
Not sure if an FHA mortgage is right for you? One of the most often-repeated forms of advice for finding the right lender for you is to compare several lenders and ask about your loan options, especially when it comes to the differences between conventional and FHA loans.
Methodology
Don’t compare two or three lenders. You may not get a complete picture of your options.
Consider asking four or five lenders the same questions about their rates, terms, and options for future loans, such as cash-out refinancing, renovation loan options, and refinancing into a lower (or fixed) interest rate.
Try to ask the same identical questions of each lender. Treating it like a science project where you need consistent methods to get your results can help. Be scientific in your approach to your questions, and try to stick to facts. Don’t let emotions get in the way of smart decision-making.
Questions to Ask
Ask each lender what their current going interest rate is for the type of loan you seek. Also ask them how those rates have changed in the last six months and where that lender feels rates are going in the near future.
Be sure to ask the lender what “overlays” or additional requirements for their loans are. For example, FHA mortgages say you can technically qualify for a mortgage with a 580 FICO score. But the lender’s requirements may be higher than this, which is permitted under the FHA loan program.
Ask your lender to compare FICO score requirements for both FHA and conventional loan options.
Also, ask the lender what early payoff fees may be required if you are considering your options between an FHA and a conventional loan. Remember that FHA loans do not allow the lender to charge you a fee to pay the loan off ahead of schedule.
Ask whether and how the fees might differ between the bank’s FHA loan options and others.
Other Considerations for FHA Loans
FHA mortgages have a streamlined refinance option for borrowers to get into a cheaper mortgage when interest rates are favorable.
This option has no FHA-required credit check or appraisal, though the lender is free to require one or both. The key here is to know what conventional alternatives (if any) exist that may be comparable to an FHA streamline refinance.
Another consideration? Whether or not the house appraises at or better than the asking price. FHA loans allow you to walk away from a transaction without penalty in such cases. Does your lender offer a conventional equivalent to that feature of the FHA home loan program?
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RELATED VIDEOS:
Home Equity Can Secure Your Second Mortgage
Consider the Advantages of Discount Points
FHA Limits are Calculated and Updated Annually
Methodology
Don’t compare two or three lenders. You may not get a complete picture of your options.
Consider asking four or five lenders the same questions about their rates, terms, and options for future loans, such as cash-out refinancing, renovation loan options, and refinancing into a lower (or fixed) interest rate.
Try to ask the same identical questions of each lender. Treating it like a science project where you need consistent methods to get your results can help. Be scientific in your approach to your questions, and try to stick to facts. Don’t let emotions get in the way of smart decision-making.
Questions to Ask
Ask each lender what their current going interest rate is for the type of loan you seek. Also ask them how those rates have changed in the last six months and where that lender feels rates are going in the near future.
Be sure to ask the lender what “overlays” or additional requirements for their loans are. For example, FHA mortgages say you can technically qualify for a mortgage with a 580 FICO score. But the lender’s requirements may be higher than this, which is permitted under the FHA loan program.
Ask your lender to compare FICO score requirements for both FHA and conventional loan options.
Also, ask the lender what early payoff fees may be required if you are considering your options between an FHA and a conventional loan. Remember that FHA loans do not allow the lender to charge you a fee to pay the loan off ahead of schedule.
Ask whether and how the fees might differ between the bank’s FHA loan options and others.
Other Considerations for FHA Loans
FHA mortgages have a streamlined refinance option for borrowers to get into a cheaper mortgage when interest rates are favorable.
This option has no FHA-required credit check or appraisal, though the lender is free to require one or both. The key here is to know what conventional alternatives (if any) exist that may be comparable to an FHA streamline refinance.
Another consideration? Whether or not the house appraises at or better than the asking price. FHA loans allow you to walk away from a transaction without penalty in such cases. Does your lender offer a conventional equivalent to that feature of the FHA home loan program?
------------------------------
RELATED VIDEOS:
Home Equity Can Secure Your Second Mortgage
Consider the Advantages of Discount Points
FHA Limits are Calculated and Updated Annually
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