First Time Home Buyer: Not All Lender are Same
The first step in the home buying process should be talking to your lender for mortgage pre-qualification. Choosing the right lender can save you time, money and a lot of frustration in the long run. So how do you choose the lender that is best for you? Each lender has its own loan program, mortgage approval standards, in terms of credit scores, income requirements, debt levels and more.
Some lenders more stringent than others
Although Fannie Mae, Freddie Mac, FHA, VA have set standards for the loans they’ll accept. However, these guarantees don’t ease all a lender’s concerns about a home loan default. So they impose their own, more stringent requirements, known as overlay.
Common mortgage overlays
One of the most common overlays is on credit scores. For example, the FHA will guarantee mortgages to borrowers with credit scores as low as 500, but in reality, few lenders will go below 620 – 640. That’s an overlay. In addition, they may impose other requirements to approve credit scores below 640 or so, such as additional income documentation.
Other common overlays are debt-to-income ratio, employment history, loan amount, down payments or equity, bankruptcy or foreclosure history and so on.
Different loan product
There are many loan product available these day. Most common loan product are FHA, Conventional and VA, where most lender are offering. Other special type of loan such as HUD 184, not a lot of lender is offering this product.
Interest rate
Lenders have the flexibility to be very competitive, or put a premium on the rates they offer. This is done based upon their desire to win your business. They also may put more of a premium on the rehab and construction loans which take more work on their part.
Underwriting
When you apply for a mortgage, the lender is the one who will process and underwrite your loan. The backbone of any lending organization will be the processors and underwriters. These processors and underwriters will have the final say whether your loan is approval. In most instances, the strength and competency of those individuals will play a major role in whether you loan will be approved on time. Not all processors and underwriters at every lender will be the same.
Summary
As you can see, not all lender are the same because many do not offer the same programs, will have different credit score requirements, and rates will be different. When getting a mortgage, you should interview several lenders and get additional rate quotes. Your real estate agent will be happy to refer you to numerous lender partners. Ultimately, the lender that you work with will be your choice. So if you have someone that you like, work with them.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ and surrounding area, we hope you will consider us. Contact us today for complimentary consultation.
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