Lender: An organization or person that lends money, usually a bank.
Lender: A person or company, usually a bank, that loans money for the purchase of property and takes a security interest in the property.
Tips for Selecting the Right Mortgage Lender
A mortgage lender is an organization, often a bank, that provides funding for the purchase of real estate.
A mortgage lender uses a mortgage as security for the lending of money. After the mortgage is secured, the lender can sell the mortgage loan to another organization, which becomes the mortgage holder.
Often, homeowners work with mortgage brokers to find the mortgage lender that best suits their needs. Brokers, who are licensed and regulated to work in the financial sector, charge origination and/or broker fees, which are paid at the time of closing.
Homeowners are advised to beware of fraudulent lenders, which tend to advertise unreal rates and make false claims.
When meeting a lender, a homeowner should know their credit score and if there are any errors on your credit report, says Kevin Quinn, senior vice president of retail lending at First Internet Bank. It’s also important for a homeowner to know how much they can afford for a home and how much of a down payment they can make so the lender can offer personalized recommendations.
“Spending too much on a home could leave you with little money for retirement, your children’s college fund, family vacations or even everyday expenses,” Quinn says.
Quinn also says that knowing exactly how much one makes and how much one owes is key. Lenders study a homeowner’s gross income – the money made before deductions – as well as estimated monthly expenses to determine if a homeowner qualifies for a loan. Generally, a homeowner’s expenses should not equal more than 43 percent of their gross monthly income.
Quinn adds that oftentimes mortgage lenders may approve a homeowner for a loan they cannot comfortably afford. He recommends looking at net income to realistically assess how much money a homeowner has at their disposal each month.
“There is a difference from what the guidelines say you can do and what you should do,” says Stuart Crawford, regional manager of V.I.P. Mortgage in Scottsdale, AZ. “If you go with the guidelines, you’ll be pushing yourself to the absolute financial maximum. That could lead to trouble if anything changes with your finances.”