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How to Choose the Right Mortgage Lender

Choosing the right mortgage lender is never an easy task for any borrower. Sometimes the task of finding the lender can get quite confusing as there are so many options available. However, if you’re ready to do some research and consider a few things, you can find a lender that not only meets your needs but also offers the best rates and terms with the mortgage.

Before shopping for a home mortgage, it’s equally important to take caution and understand how property investment is one of the largest investments of your life. When you pick a lender, you should also not forget how you need a lending partner that meets your needs and provides you the kind of flexibility you may need with the mortgage.

With banks, credit unions and private mortgage lenders to choose from, you know options are in plenty and the only thing that matters is to figure out what is going to work best for you. This is why investors need to analyze a number of different things before choosing the right mortgage lender.

In this post, we will look at different types of lenders out there and how to choose from them.

But before moving further, let’s get started with…

What is a mortgage lender?

A mortgage lender is a financial institution such as a bank, credit union, or mortgage investment company that offers financing to anyone looking to purchase real estate for sale. Such a lender will set specific guidelines and a borrower who meets those guidelines can qualify for the loan. Once approved, the borrower will need to follow the loan terms, repayment schedule, interest rates and other terms set by the lender.

Types of Mortgage Lenders

In Canada, mortgage loans are readily available from a variety of institutions. These lenders are broadly classified into two groups based on the requirements and criteria set for borrowers.

The main two types of lenders include:

A Lenders – All major banks and credit unions that offer loans belong to this category. To get a loan from these lenders, borrowers need to have a high credit score and must also meet their tough financial and credit history requirements. More importantly, buyers who want to secure a home mortgage from “A” lenders are required to do a mortgage stress test in addition to following the normal application routine.

B Lenders – Including entities like Mortgage Finance Companies, these lenders don’t have as stringent financial and credit requirements in place as “A” lenders do but have a different set of criteria for applicants. Borrowers who need shorter mortgage terms or have less-than-perfect credit scores often turn to “B” lenders for loans.

Tips to choose the right mortgage lender

Compare mortgage rates and terms – As a borrower, you need to choose a mortgage lender based on the rates and terms they offer. You need to compare the rates and terms offered by different lenders and ensure that you are getting the best available rates in the market.

Consider the type of lender – There is no shortage of mortgage lenders in Canada, including banks, private lenders, mortgage brokers, and credit unions. If you want to appear more reliable to sellers, you should approach banks for loans. However, if you want a personalized service, mortgage brokers may be a better fit for you.

Check the lender’s reputation – Not all lenders are reliable and some of them may have complaints against them. To avoid bad lenders, you can do a little research, read online reviews and validate the lender’s reputation easily. Asking for recommendations from family and friends is also a good move to indirectly verify a lender’s market reputation.

Look at additional costs and fees – Interest rates are surely not the only costs you need to worry about as a borrower. There are plenty of other additional costs and fees as well you need to keep an eye on, such as legal fees, closing costs etc. To get the best deal, make sure you compare those fees as well among lenders so that you can walk away with what you want.

Consider pre-approval – As an investor, you would ideally like to get pre-approved for a mortgage so that you can shop for properties for sale with confidence. When you are pre-approved, you know how much you can afford to borrow, which can be very helpful. For that reason, you should work with a lender that not only offers pre-approval but also helps you through the process.

Hassle-free mortgage process – Getting a mortgage approved can be a tedious and complex exercise. The hassles feel more when the lender does not provide good customer service. To avoid any hassle with the mortgage, make sure you work with a reputed lender that has teams and systems in place for helping borrowers through the entire process.

Final Process

Choosing the right mortgage lender can take away most of the troubles that a property transaction brings. With a little research and some consideration, you can find a lender that not only offers the best rates but also provides the kind of help you expect as a borrower.


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