How do you select the mortgage lender that’s right for you?

There are a couple of tricks to selecting the right lender. First of all, you have to look beyond who offers the lowest interest rates. A lender who offers a considerably lower rate may supplement that rate with fees and charges that will augment the overall cost to you. Or, if your down payment is less than 20% of the cost of your prospective home, the lender may require that you secure costly private mortgage insurance, which could run between 0.5% and 1% of the total loan amount per year. The point is, current mortgage rates should not, by themselves, be sufficient inducement to take out a loan with a particular lender. That said, it helps if you can lock in an interest rate when you apply for a loan. A good lender will guarantee you a specific interest rate for the length of time required to complete the application.

Other things to consider include balloon payment mortgages, and prepayment penalties. Balloon payment mortgages, which require a large final payment, and prepayment penalties, which go into effect if you pay off your mortgage within a certain time period, can make your loan more difficult to pay off or end up costing you more in the long run. Ask for a Good Faith Estimate that will detail all of the lender’s fees and conditions. Scrupulous lenders should provide this information willingly. Having it will help you compare loans among multiple lenders, and it’s good information in case you want to refinance or take out home equity loans in the future.

You can also ask the lender for references and check if they’re approved by the National Association of Mortgage Brokers and/or the Financial Planning Association. Above all, a good lender should be forthcoming, responsive, knowledgeable, and concerned about your long-term financial goals, not just the mortgage agreement.