Finding a mortgage lender can seem complicated if it's your first time buying a home. It's also a big commitment. You'll have to interact with your lender for decades, potentially - so it's very important that you do your research.
Here are four features to look for when choosing a mortgage lender:
1. They accept alternative credit reports
Often, the first thing a mortgage lender will ask about is your credit history. If you are one of the 26 million Americans who have no credit history, and therefore no credit score, you may use another option.
Alternative credit reports take data from the monthly bills you pay - such as rent, internet and utilities - to generate a score between 100 and 850. Some mortgage lenders can use this score instead of a traditional credit score to determine the terms of your mortgage loan. In fact, under the Equal Credit Opportunity Act, lenders are obliged to consider your alternative credit report.
2. They don't discriminate
If you're concerned that mortgage lenders may use your personal history to deny your request, you should understand that you have a number of legal protections against discrimination. In the near future, mortgage underwriters may be able to use advanced analytics to predict risk levels. But there are some factors that will never enter the equation.
According to The Mortgage Reports, lenders must follow these guidelines, among others:
- Race: Some lenders will ask your race, color or nation of origin - you don't have to answer these questions. However, the lender can use this information in a self-audit to prevent discrimination.
- Citizenship: You don't need to be a U.S. citizen to qualify for a mortgage loan, but foreign nationals must have an Employment Authorization Document.
- Age: Lenders cannot discriminate against older people. Your age has no bearing on the length of your mortgage.
- Marital status: If you're married, the loan debt could be applied to you as well as your spouse, though this may depend on your state of residence. You don't need to disclose if you've been divorced or if you receive or pay child support. Likewise, lenders can't ask about your family planning.
3. They're not pushy
A good mortgage lender understands that you're shopping around for the best possible loan. As Bankrate reported, you don't need to apply for a loan to ask questions. It's best to find a lender who will sit down with you to discuss your options in great detail.
Ask a lot of questions and never sign anything that you do not understand. If a lender pressures you to move forward on a loan faster than you are comfortable with, you have every right to walk away.
4. They've worked with people you trust
Do not hesitate to use your personal network to find a lender. If any of your friends, colleagues or family members have recently bought a home, ask them about their lender.
Mark Greene, a mortgage industry expert writing in Forbes Magazine, explained that finding a lender through your network, or through a reference from your real estate agent, can boost your confidence in your mortgage decision-making process.
Once you have your free alternative credit report, start researching mortgage lenders. Look for these features to make a smart decision so you can enjoy your new home with peace of mind.