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Published February 7, 2019

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Mortgages are complicated. There are obscure terms many people are unfamiliar with, and all kinds of calculations that determine which is the best mortgage for you. The important thing is to find a lender who is interested in earning your business and walking you through the process. So, what is a mortgage lender and how do you find the right one for you?

What is a mortgage lender?

A mortgage lender is someone who lends you money using real estate property as collateral. Collateral is what secures the loan.

If you don't repay the loan, the lender has the right to take the collateral—the home, for example. Lenders don't lend money with the idea of taking the home; it's a huge pain for them when they have to. Having the home as collateral gives them some guarantee their money will not just disappear.

Sometimes mortgage lenders issue money for people to buy a home, other times to refinance, or change the terms of the loan, so the homeowner can use the borrowed money to do things like improve the home and increase its value. Other times lenders make reverse mortgages—if someone has paid a lot of money toward the home and they owe little or nothing on it, they might want to borrow back the money they paid into the home. Older homeowners sometimes do this to have more money to live on in retirement.

How do I find a mortgage lender?

Start early

Don't put off finding a mortgage lender until you want or need to make a move. It may turn out you need six months or a year or so to build credit, save up for a down payment, and do some research into your options. CUTX, for example, has programs like Build It/ Rebuild It to help our members bring their credit scores up before applying for a mortgage loan.

Focus on the relationship

The mortgage loan industry is extremely competitive, therefore it's worth it to shop around and see which lenders are offering the better rates. However, you may not want to choose the bargain lender because extremely low rates are a sign that they make their money on volume (making lots of loans fast). Sometimes it takes time and effort to help a borrower meet the criteria for the loan they need and a relationship-based lender will do that work. They see the mortgage as part of a long-term relationship that includes helping you reach all your financial goals, not as a way to make a fast commission on a sale.

Assess your situation

Are you a military veteran or surviving spouse? Are you looking for a property in a rural area? You may want to work with a lending institution that offers loans with special terms for the Veterans Administration or United States Department of Agriculture. Most people get conventional loans that don't fall under these parameters. Before you start shopping for a conventional loan, you should know: What are some of the mortgage options?

  • Do you have money for a down payment? How much?
  • What is your current credit score?
  • How much gross income do you have every month?
  • How much debt do you have every month?
  • Should you take the plunge now or spend a year saving for a down payment and cleaning up your credit?

Check your facts

Before signing anything, you should ask a lender:

  • What kinds of mortgages do you handle?
  • Do you service your own mortgages or sell them?
  • What kind of down payment will I need and what interest rates do you offer?
  • What closing costs, fees, Private Mortgage Insurance (PMI), or other costs can I expect and will I need to pay these upfront or can I roll them into the mortgage?
  • Will my mortgage decision be made strictly on an algorithm or do you work to help me get the best mortgage?
  • If their rates are higher than others: Can you tell me why your rates are higher than these other competitors?

Get pre-qualified for your mortgage

Before you start making plans, talk with a lender who can look at your credit score, your income, your debt, and other factors to help you decide whether to proceed with a mortgage now or take other steps first.

The right mortgage lender is a guide and an advocate. They want to help you get into your dream home, but not if the payments will wind up being a nightmare. They're someone you can trust who will help you educate yourself to make the right decision. CUTX would love to talk to you about how you can get the right mortgage. Contact us today!

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