Are you looking to buy a home?
If yes, you deserve a big thumbs up. At a time when the median price of a home hovers above $250,000, not many people have the financial capability to become homeowners.
However, if you’re anything like the vast majority of homebuyers in the United States, you aren’t planning to make the purchase in cash. You simply can’t afford it. Your only option is to take out a mortgage.
Getting a mortgage is, by all measures, a smart move. But you first need to find the right mortgage company. This can be a complicated affair, especially considering that there are thousands of mortgage companies in the country.
In this article, we’re telling you how to choose a mortgage company that suits your needs.
What Are the Different Types of Mortgage Companies?
If you’ve never taken out a mortgage before, it’s easy to think that only traditional banks offer home loans. While it’s true that these banks make the vast majority of mortgages, they’re not the only ones in this market.
It’s possible to secure a mortgage from a credit union. You can also get a mortgage from a private mortgage company.
Credit unions operate like banks, but you’ll typically need to build a savings history before qualifying for the union’s credit facilities. Mortgage companies are not your typical financial institutions. These are companies that only offer mortgages – nothing more.
As such, the first step to find the right mortgage company is to identify the various mortgage lenders available to you. Each of these lenders come with pros and cons, so you need to do a thorough assessment before making a decision.
In general, though, traditional banks are the go-to for most borrowers. Although these banks have bureaucracies that delay the approval process, they usually offer the lowest interest rates in town. Credit unions have a similar reputation.
Private mortgage companies are known to review mortgage applications quickly, but they charge higher interest rates.
Seek the advice of a Mortgage Broker
When you’re seeking a mortgage, you have two options: go straight to your preferred lender and submit your application or use the services of a mortgage broker.
When your goal is to find the best mortgage company, it’s in your best interest to hire a mortgage broker. Like most brokers, these brokers aren’t employed by mortgage companies. They work independently, and their job is to help prospective borrowers like you find the best mortgage company.
An experienced mortgage broker knows all the mortgage lenders in your area. They have a good understanding of the various mortgage facilities offered by these lenders.
As such, when you work with an experienced mortgage broker, you’ll get insights into the various lenders. With this information, along with the advice of your mortgage broker, you’ll be in a good position to choose the right mortgage company.
It’s important to note that mortgage brokers are not employees of mortgage lenders. Consequently, your broker might need you to pay a fee for the work they’ll do for you.
Consider the Size of Mortgage You Need
Although the median cost of a home is $250,000, this doesn’t necessarily mean it’s the size of home you need. Perhaps you need a cheaper home. Or maybe you need a million-dollar home.
The size of the mortgage you need will have a direct impact on your choice of a mortgage company. This is because not all mortgage companies will approve the amount of money you need to borrow.
For instance, if you’re looking to buy a million-dollar home, not every lender is going to give you that amount of money. Typically, commercial banks are the go-to when you want a six-figure mortgage. Most banks have enormous cash reserves, which is why they’re in a better position to lend large amounts of money.
On the other hand, private mortgage companies don’t typically offer large mortgages because they are operating on tight cash reserves. So, if you need a large mortgage, you should focus on approaching traditional banks instead of private mortgage companies.
Assess Your Personal Financial Situation
There’s a lot that mortgage lenders consider before approving a mortgage application.
First, there’s your credit score. It must meet the lender’s minimum requirements. If it’s 620, your score must be 620 or higher.
Second, there’s your credit history. If you’ve got a record of making late payments on loans or utility bills, there’s a good chance the lender will think twice about giving you a home loan.
Third, there’s your income. How much money are you making right now? Generally, you should have enough money left to make monthly mortgage repayments after you’ve deducted your current living expenses.
Now, mortgage lenders have varying requirements. Some, especially traditional banks, have stricter requirements. Private mortgage companies aren’t as strict.
For instance, if your credit score isn’t perfect, you’re not likely to get mortgage approval from a traditional bank. However, you could get approval from a private mortgage company.
So, assess your personal financial situation before choosing a mortgage company. If your finances are on shaky ground, you’re best advised to approach a private mortgage company.
Choose the Right Mortgage Company for Your Needs
Taking out a mortgage is one of the best financial decisions you can make. A mortgage offers an easier path to homeownership. With this guide, you now have the information you need to choose the best mortgage company for your needs.
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