Choose a lender

After I spilled the home buying tea (if you haven’t read the news, check it out here, then come back to this post!) so many of you asked for more details about our experience. I’m going to do this as a series because there is just so much to share! We’ll start with how we chose our lender because the financial aspect of this process was definitely the hardest. I’m not a finance person, never have been never will be. But these tips really helped to get me started! Keep in mind the information provided is based solely on my experience. You should definitely do your own research before you choose a lender yourself! 🙂

*This post may contain affiliate links. All content and opinions expressed are my own.*

How to choose a lender

What to do before you choose a lender

Before you even think about choosing your lender, you need to know how much home you can afford. I’m sure there are lots of ways to do this and tools to help you, but here’s what I did:

  • Add up all non-negotiable reoccurring expenses (car payment and insurance, loans, etc)
  • Research the cost of gas, electric, water, sewer, and garbage in the county and total those up
  • Add up any extra monthly-yearly expenses (Netflix, Amazon Prime, Norton, Microsoft, etc). This is also a great opportunity to see where you could be saving money, and cut out those unnecessary expenses.
  • Factor in cost-of-living expenses (gas, groceries, savings, “fun” money, etc)

We also gave ourselves a buffer amount as well, sort of a “just in case” fund. Whatever is left after you add all of these things up, is the maximum amount of home you can afford. But here’s the kicker – that number does not equal the max mortgage. It’s actually the maximum home including mortgage, taxes, insurance, and PMI (if needed).

Know what kind of loan you want

Are you a veteran? A first-time home buyer? Do you work in a public service sector like law enforcement, nursing, or teaching? Many states and counties offer special home lending options to folks in these categories, so be sure to research the options available in your area.

Also, depending where you are looking to buy, there are different loan options. If buying a home in a rural area, you could quality for a different loan type than if you’re buying a condo in an urban development. We knew going in to it that we would be buying a house in the suburbs and that we wanted a conventional 30-year fixed loan (meaning we did not want our interest to change during the life of our loan). Even though we qualified for a first-time home buyer program, we ended up not going that route. In Oregon and Washington County, the first-time home buyer program allows you to put down a smaller down payment (3-5%). However, the APR was not any better than the lenders we had researched on our own, so we went with the conventional loan option instead.

Research your options before getting pre-approved

Like I mentioned above, I have no financing experience. When we started thinking about buying a home, choosing our lender was definitely the scariest part. I did a lot of Googling, and the first thing I tried was Quicken Loans. They have a mortgage calculator and you can compare rates from multiple lenders. This was a good start because I was able to see a list of lenders, but also super annoying because I started getting cold calls five times a day and way to many e-mails. It actually turned me off from even researching those lenders because it was so annoying.

Instead, what I recommend is to research the lenders separately. DO NOT GIVE YOUR E-MAIL OR PHONE NUMBER OUT. At least not until you are seriously ready to talk to someone from that mortgage company. And make sure you look at different lender options. There are the big banks, like JP Morgan Chase, Bank of America, etc. Then there are smaller credit unions (Northwest Community Credit Union, Providence Credit Union). There are also online mortgage companies like Rocket Mortgage. We ended up checking rates with a combination of lenders.

Ask for recommendations

All of the lenders I reached out to were recommended to me by friends and family. Here are the lenders we got pre-approval statements from:

Of the four, we ended up going with PenFed. They had the lowest APR of them all, and they also don’t charge lender fees, which was a big bonus! They also offered us a special and gave us cash back at close. We did have some mishaps with the lender (he forgot to send in our appraisal addendum) and it caused a ton of stress right up to our closing date. The mortgage processor also had terrible communication skills and was asking for additional documents the night before our closing date. So definitely some pros and cons to choosing PenFed but all in all, I’m glad we went with them.

Before you choose a lender, don’t forget…

You are not required to go with a lender just because you got pre-approved through them. If you do not feel like you’re getting the best deal, keep looking! The mortgage officer might try and guilt you, but just ignore them. This is not a small purchase and you’re going to have this loan for a long time, so choose a lender that’s best for YOU, and screw their feelings. It’s their job to sign you (they’re the ones making the money after all). So keep your emotions out of it, and do what’s right for you.

xo,

B

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