6 things to look for in a lender

These benefits may make your mortgage experience better.

Things To Look For In A Mortage Lender

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When you’re ready to purchase your next home, you want to know that your lender will be there with the right products and services each step of the way. These six features are critical components of a lender that can meet your needs:

  1. A wide selection of loan programs. Every homeowner has different circumstances, and borrowing needs often change over the years. Fixed-rate and adjustable-rate mortgages (ARMs) are two of the most frequently used loan types when buying a home. Depending on your situation, one may be more beneficial to you.
  2. Loan preapproval. Preapproval gives you an estimate of the home loan amount you may qualify for, so you can focus on finding the house you want that fits within your budget. Preapproval also lets real estate professionals and sellers know you’re a serious buyer because you’ve had an initial review of your financial information. Wells Fargo offers PriorityBuyer® preapproval, which includes a credit check and an actual mortgage application, making it more powerful than a prequalification letter, which generally only estimates what you may be able to borrow based on information you’ve provided.1
  3. Digital application tracking. The ability to access and track your application digitally allows you to check on its progress at any time. With yourLoanTracker℠ from Wells Fargo, you can also go online to complete important tasks, such as e-disclosures (signed disclosures mean the property appraisal can be ordered, and so it is important to get this step underway as soon as possible).2 Your home mortgage specialist will be your guide from beginning to end.
  4. Primary home, second home/vacation property and investment property lending products. Regardless of your situation, your lender should have options to help you reach your home buying goals.
  5. Attentive service from knowledgeable mortgage professionals. Your mortgage lender should be there for every step of the home buying process to answer any questions you may have.

Now that you know what features to look for in your mortgage lender, view these helpful videos that may teach you more about understanding how much you can borrow in a mortgage, and what the difference is between prequalification and preapproval.

Learn More: How Much Can You Borrow?

One of the first steps in buying a new house is to arrange a mortgage loan. The amount you can borrow will depend on a number of factors, including your ability to repay the loan. Your lender will use two ratio-based guidelines to evaluate your ability to repay.

The first is your debt-to-income ratio. Debt-to-income ratio is the percentage of your monthly income that is spent on monthly debt payments.

So that means your expected monthly mortgage payment (principal, interest, taxes, and insurance) plus your other monthly debt obligations are compared to your gross pre-tax monthly income.

Mortgage program guidelines vary, but a good rule of thumb is to keep your total debt level at or below 36% of your gross monthly income.

The second, housing-to-income ratio, is the percentage of your monthly income that is spent on monthly housing payments. So your lender will also compare just your expected monthly mortgage payment (including taxes and insurance) to your gross monthly income. Mortgage program guidelines vary, but a good rule of thumb is to keep your housing expense level at or below 28%.

Even if you fall within these guidelines, make certain that you feel comfortable making your monthly mortgage, insurance, and tax payments along with the payments for all your other monthly obligations.

These obligations include savings, debts or loans, groceries and household supplies, clothing, shoes and accessories, transportation, gifts and charitable donations, Internet, cable, phone, and travel and entertainment.

And remember, homes have other costs, too, such as utilities, maintenance and repairs, that may not exist if you rent.

Learn More: Prequalification Versus Preapproval

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Smart buyers do their homework. They estimate a price range for a house before they shop. You can do this with a mortgage prequalification or a preapproval.

A free mortgage prequalification lets you know roughly how much you can borrow, based on basic financial data you provide.

There is no fee or obligation and no credit check involved.

A pre-approval involves a more detailed look at your data and is based on a preliminary review of your credit information. It tells a real estate agent and seller that you’ve been preapproved for a specific loan amount. With a preapproval, there may be a fee for the cost of the credit check.

Because it is based on more detailed information and an actual credit check, a preapproval has greater benefits than a prequalification.

With a preapproval, you’ll be able to shop confidently because you have an estimate of how much you may be able to borrow, and your real estate agent will know your approximate price range to search.

Getting preapproved or prequalified can help you estimate your price range.

However, it’s important to remember that neither one is a commitment to lend.

1 A PriorityBuyer® preapproval is based on our preliminary review of information provided and limited credit information only and is not a commitment to lend. We will be able to offer a loan commitment upon verification of application information, satisfying all underwriting requirements and conditions, and property acceptability and eligibility, including appraisal and title report. Preapprovals are subject to change or cancellation if a requested loan no longer meets applicable regulatory requirements. Preapprovals are not available on all products. See a home mortgage specialist for details.

yourLoan Tracker is not available with all loans; talk to a home mortgage consultant for details.