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I recently received an e-mail from a reader who was wondering how to select a mortgage lender. More specifically, he wanted to know:
“If bank A offers me a certain APR with roughly $3,000 in closing costs, while bank B offers me a lower APR with roughly $3,000 in closing costs, but bank B is a no name bank, which do I pick? In the end, a contract is a contract, right? If I sign with ‘Joe Blow Bank’ and they loan me X dollars at the lower APR, should I go with them? Or should I remember what my mom told me? If it sounds too good to be true, then it probably is.”
Personally, the only factors that I really pay attention to are the mortgage interest rate, lender’s fees, and closing costs. We’ve generally worked through a mortgage broker, and haven’t ever thought about who would ultimately wind up underwriting our loan.
In fact, it’s very common for mortgages to change hands within a few months of origination. As such, it’s not like you really get to choose who will end up servicing your loan, anyway.
Just be 100% sure that you’re comparing apples with apples… For example, adjustable rate mortgages (ARMs) typically have low initial rates that will move upward after three, five, or seven years. In the case of fixed rate mortgages, shorter term loans typically have lower rates than longer term loans (e.g., 15 year rates = 30 year rates).
Assuming that you’re being offered truly equivalent products, I’d focus on the financial details rather than sweating the name of the bank. Of course, you’ll want to be sure that your prospective lenders are legitimate outfits, so go ahead an check them out with the Better Business Bureau, but… Don’t let name recognition (or lack thereof) push you into a more costly mortgage.
If you have anything to add, please share your thoughts in the comments.
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