First Time Home Buyers


Comparing Different Types

of Mortgage Lenders

If you are applying for a home mortgage loan, there are numerous mortgage lending options. First time home buyers may not know where to start. Different mortgage lenders fit different circumstances. In fact, choosing the wrong lender will likely result in paying a higher interest rate. With this said, it is important for homebuyers to educate themselves on the different types of mortgage lenders, and select the lender that is perfect for them. Below is an overview of each of the 3 main sources for a first time home buyer mortgage.

Traditional Mortgage Lenders: Banks, Credit Unions, etc.

While waiting in the lobby of a bank or credit union, perhaps you have observed signs advertising low mortgage rates. It is possible to obtain a mortgage loan from your local bank or credit union, and they would likely be eager to set up an appointment to talk with you about it.

Using a local banker can be advantageous in some situations. Each mortgage lending institution establishes its own lending guidelines. Moreover, these lenders can pick and choose the type of loans they want to service, as well as who they provide these loans to. Also, you can develop a strong business relationship with your local bank lending officer. When the lending officer knows you, and knows that you are an outstanding repeat customer, you'll be able to negotiate much more flexible terms. Future loan approvals will also become much easier.

There are some downsides to getting a home mortgage loan through a local bank. First, they do have more overhead than other lending options. These overhead costs must be compensated for in the form of slightly higher interest rates. There are various types of home loans. These are intended to help individuals with good credit, poor credit, no credit, recent bankruptcy, etc. Unfortunately, not all lenders offer a range of home loans, and banks and credit unions are far more likely to only provide home mortgage loans to people with excellent credit. Thus, people with bad credit will likely not get approved.

Likewise, banks and credit unions may choose not to service bad credit loans. Therefore, those with a credit score below 680 may not qualify at all for a traditional loan through a bank or credit union. If this is the case, these applicants may have to seek other avenues of financing.

Mortgage Loan Brokers

Because mortgage comparisons are important, many homebuyers bypass local banks. Accepting the first mortgage offer received is not likely a wise thing to do. Different lenders offer different interest rates. The best way to get the lowest mortgage rate possible is to obtain quotes from many lenders.

Mortgage brokers are very useful. Although brokers do not finance home loans themselves, working with a mortgage broker gives first time home buyers the opportunity to receive multiple offers from different lenders. Additionally, brokers have access to many types of loans. Thus, persons with a low credit rating can also obtain quotes from different lenders offering bad credit mortgages.

The downside is that mortgage brokers will charge a fee for their service. First time home buyers who have online access and are willing to do a little research can do the same things that a mortgage broker does themselves.

Applying Online

The way that business is conducted has changed dramatically in the age of the internet, and home mortgage lending is no exception. Lenders online compete fiercely for business. Whereas with traditional lending through banks, applying for a loan was seen as a personal transaction between the banker and the borrower, that is no longer the case. Online mortgage lending is viewed by consumers primarily as a commodity, with no observable differences between lenders. The only difference seen is the interest rate charged. Lenders are competing based upon who provides the lowest interest rate. This saves the borrower literally thousands of dollars in interest costs over the life of the loan.

If you want the lowest interest rate possible, applying online is likely going to be option that is best suited for you. To get pre-approved and find out how much mortgage you qualify for, please visit your local credit union. There is no cost and no obligation. It is only when you decide to accept the loan that you'll have to pay any fees.

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