Research Lenders

The lender that you select should be based on the following criteria:

• Does the lender have mortgage products to finance the type property that you are proposing to purchase?
• Does the lender have the specific mortgage product in which you are interested?
• Does the lender have other mortgages in the neighborhood where you are planning to purchase?
• What are the requirements for the mortgage that suits your proposed property?
• How much will acquiring the mortgage cost?

These questions should be part of your initial investigation. After narrowing the list to 3 or 4 lenders, you should ask more detailed questions. A booklet, Looking for the Best Mortgage  has valuable information and a great mortgage shopping worksheet to assist you in your search for the best mortgage and lender.

Be sure to read our sections on mortgage types and pre-approval

Does the lender have mortgage products to finance the type property that you are proposing to purchase?

Mortgages are very specific products created to finance property. Mortgages products that finance single-family homes and condominiums do not necessarily finance 2-4 family homes. Mortgages that finance living space does not finance commercial space. Some lenders do not work well with property sold through affordable housing lotteries. In order to determine if the lender has products that will work for your situation, be specific in your statements pertaining to your purchase plans.

Does the lender have the specific mortgage product in which you are interested?

If you are interested in a specific mortgage product such as the Soft-Second Mortgage or a MassHousing mortgage product, not all lenders carry them. Some lenders do have products that look like these products, but the interest rates may not be as appealing. If you are certain of the mortgage product that you want to use, ask for it by its name. If you do not receive a yes or no response, keep looking for a lender.

Does the lender have other mortgages in the neighborhood where you are planning to purchase?

Some lenders prefer stable neighborhoods with properties with predictable appreciation. If that does not describe your proposed area, it would be a safe bet to call lenders who have a Community Reinvestment Act (CRA) Requirement. In Massachusetts, that would be a bank. Banks are required to lend in neighborhoods in which they have branches. Mortgage companies do not have that requirement. You may not be told this up front but the deal may fall apart during your purchase.

What are the down payment requirements for the mortgage that suits your proposed property?

Depending on the mortgage product and the lender, there are different down payment requirements. Single-family and condominiums may have as low as a 0 – 3 percent down payment requirement for a first time buyer. A 2-4 family house may have a 5-10 percent requirement. A commercial property may require 10 percent down or more. Many lenders have their own mortgage products. Make sure the down payment is in line with your requirements.

How much will acquiring the mortgage cost?

Processing the mortgage is an expense that the lender incurs on your behalf. The lender passes on the costs for mortgage processing to you. This expense is called closing cost. Expenses included in closing costs are the bank’s attorney fees, the appraisal of the property, document preparation and mailing, escrow for property taxes and insurance, and other expenses. Some mortgages may also include additional interest that is prepaid at the closing (points). The lender should be able to give you a good faith estimate for these costs. Closing costs can be anywhere from 1% to 5% of the loan amount. The final closing costs will not be calculated until the closing date has been scheduled. This will be a day or two before the closing. The amount will be close to the estimate.

Your Looking for the Best Mortgage booklet will be a great help in asking questions about closing costs.