What does a mortgage lender mean?
A mortgage lender is an entity that lends mortgages to borrowers and receives an interest in return, according to the financial dictionary. Lenders can be banks, credit unions, or other lending institutions.
What should you do before looking for a mortgage?
Before you seek a mortgage lender, you must make preparations on your part to make sure that the process will be smooth. In addition, taking care of everything that can reduce your approval rate will be a good idea.
The following are some of the things you will need to do before you start looking for a mortgage lender.
- Improve your credit score: A good credit score will help you secure a low-interest rate.
>>MORE: 8 Tips You Can Use To Improve Your Credit Score
- Work on your budget: Having a budget is important since it tells you how much you can safely spend on the house. Furthermore, you should never accept all money you are qualified for unless you need it. So, you will use the budget to decide exactly how much money you should accept. For example, your mortgage lender can approve you for $600,000 whereas you only need $200,000. In this case, having the budget will help you accept only $200,000 and reject $400,000.
>>MORE: How To Make A Budget: Step-By-Step
- Work on your Debt-to-income ratio(DTI): The debt to income ratio measures how much debt you have compared to your income. A higher DTI ratio does not look good from the mortgage lenders’ perspective. For this reason, you should improve your debt-to-income ratio to increase your approval rate. In other words, you should reduce your debt before you apply for other ones.
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- Have a down payment ready: A down payment is a must when you are buying a house. For this reason, you must save for your down payment before you look for a mortgage lender. Your down payment will depend on your budget.
- Know the kind of mortgage you want: Depending on your down payment, credit score, and financial situations, you can either go with a conventional mortgage or other forms of mortgages such as FHA mortgages or USDA loans. You will need to know where you stand before applying for a mortgage.
- Find a real estate agent: A real estate agent is very important when buying a house. Although the agent cannot assume the responsibility of a mortgage broker, he/she can recommend a good mortgage lender that she worked with in the past. This will save you money and time.
- Put all your paperwork together: Having everything needed for the mortgage application will make your job easier and faster.
>>MORE: Debt To Income Ratio (DTI): What Is DTI?
What questions should you ask a mortgage lender?
Before you go along with a mortgage package from a lender, there are questions you must ask to make sure that the lender is offering exactly what you are looking for. In addition, you need to know if the lender can give you the amount you need considering the down payment you have.
Without further ado, the following are a few of many questions you should ask your lender.
- How much money can I borrow from you?
- What are the down payment requirements?
- What is the interest rate will you charge me on the mortgage?
- Will I get discount points and how many?
- What are the common delays that affect the sale closing timeline?
- Can you tell me the closing costs and associated charges?
- How much will I pay in closing costs?
- How long does it take to get approved?
- What is the difference between an adjustable-rate mortgage and a fixed-rate mortgage?
