Salida Colorado First Time Buyers Step 3: Choosing a Lender

Salida Colorado First Time Buyers Step 3:
Shopping for a Lender

You are now ready to go lender shopping. It should not matter if your lender is local or national as long as they are licensed in Colorado but it does. Time after time, we have seen loans tank because the lender did not have a feel for our tiny local market or they were part of a large bank and did not communicate with the local Realtor who holds deals together in small towns.

If you followed Step 2: How much home can you afford in Salida Colorado, then you have a general idea of what your monthly payments need to be. If you did not do those calculations, do not worry.. the lender can do it for you. Actually, they will get you closer to the exact amount than you or your Realtor because they will be pulling your credit report to get the actual interest rate that you qualify for (interest rates are based on your credit score AND the current market)

As we discussed, your interest rate is based on your credit rating so the lender's calculations of what you can afford is actually better than your Realtor's because they pull your credit report and can tell you what interest rate you qualify for, what you can afford and what the monthly payments will be.

Steps in choosing the lender for your first purchase

1. Ask for references and then

call them. The best place to get a reference is either from your realtor. S/he knows better than anyone how committed they are to customer service and communcation. Any lender worth his/her salt will have people in the area recommending them. Your Realtor will have 2-3 that s/he uses on a regular basis. Since the Realtor is involved with local lenders several times a year and knows directly how communicative they are and if they have a loan failure history, be sure to include those lenders in your search.

2. A lender for a first time buyer needs to be a teacher. Make s/he can explaining things well. Ask them questions and see how your comfort level is with the answers.

3. Ask the lenders you interview to detail the process for you. Make sure you ask about revolving credit expenses or new loans during the buying process if s/he does not mention it... a CRITICAL question.

4. Ask the lenders you interview to suggest programs that may work for you. A red flag is when someone does NOT mention FHA (Federal Housing Administration)  as a funding source, for example. The paperwork for an FHA loan is daunting and some lenders to not want to invest the time in them.

5. Ask them for an an approximation of how much house you can afford. A good lender will want to pull your credit report. Ask them what the consequences of that are to your credit.  Ask them what you would need to do if you wanted to quality for more (not that you would).

6. Ask if s/he is a lender or a mortgage broker. Often, mortgage brokers have more flexibility in interest rates and programs to put you in. And, since they are self employed, they generally hustle a bit more than a bank employee. Often, lenders who are bank employees are often more conservative in lending money, require more down, and cannot compete as well with interest rates.  That does NOT eliminate them, however. For example, folks with a local credit union can sometimes get credit that could not be found elsewhere if you have 20% down. The great thing about in-house bank lenders is that if you fall through the cracks, you may be able to get an in-house loan... a very good thing.

6. Just like when you chose your Realtor, ask for references (at least 2) if this step adds to your comfort level. When you call the former buyers, be sure to ask how well the lender communicated with them during the process and how well they stayed in touch with their Realtor. If they ask you for all your paperwork at this stage, make sure you tell them you are only interviewing. The lender of your choice will be the one who gets all your paperwork (w-2's, 2 years of taxes, bank statements, application, etc).