Step2: Selecting a Mortgage Lender/Broker

Purchasing a home can be exciting. The mortgage process determines if the purchase of your new dream home can be done at all. With so much riding on the mortgage, you should be sure to select the lender that offers you the best deal and best service.

Lets begin with various sources for loans:

• Savings and Loans (S&L): S&Ls are responsible for more than half of all mortagages loans in the United States.
• Commercial banks: Though they make loans mostly for commercial ventures, in some cases, a commercial bank may lend money for real estate sales, especially in a small town where the bank knows whether the borrower is good for the loan.
• Credit unions: These are another good source of loans. Because of your affiliation and accounts with a credit union, you might have access to a loan with fewer fees and lower interest rate. If you aren't already associated with a credit union, look into it.
• Mortgage brokers: Acting as a middleman, a mortgage broker takes your loan application, processes the paperwork (or originates the loan), and then submits the loan to a lender, who underwrites (or approves) and closes on the loan.
• Mortgage bankers: Different from a broker in that a mortgage banker both originates (processes and gathers all the paperwork for the loan) the loan directly and underwrites (or approves) the loan.
• Builders and developers: Some builders and developers also provide loans. Doing so makes it easy to sell and fiance the home in one process.
• Government agencies:Agencies such as Federal Housing Administration (FHA), Veterans Administration (VA), MassHousing etc. don't actually give you a loan, but they programs that do encourage loans that don't meet the conventional loan standards.

There are 3 government agencies that specify some rules for approving mortgages: Fannie Mae, Freddie Mac, and Ginnie Mae. Lenders follow the guidelines set out by these government agencies. So most lenders have the same limits on the amount they will lend, and most check over your financial situation using the same criteria or rules. In some cases, the loan you require go beyond the limits set by these agencies. When this happens you will be shopping for a lender that provides a portfolio loan. A portfolio loan meets different requirements than those set by the government agencies. For example if you require a loan that is higher than that set forth buy these agencies you will need to find a lender that offers a jumbo loan. A jumbo loan will carry a higher interest rate because of the greater risk associated with the being paid back in full.

Here are some questions you can use to find the right lender for you:

• What are the different loans programs that a lender can provide?
• What is the current rate for each type of loan offered?
• Are any points charged for a particular rate?
• What application fees are being charged?
• Does a loan require mortgage insurance?
• Are you allowed to lock the rate?
• Can you prepay the loan without incurring any prepayment penalties>
• What are the escrow requirements?
• What is this lenders processing time from an offer to the closing?
• If you have any questions, need information or have a problem whom do you call?