What Should I Do Before I Talk to a Lender?

Applying for a mortgage can be a bit scary, especially if you’re not familiar with the process. Besides, who wouldn’t be nervous dealing with that much money? But educating and preparing yourself takes some of the fear away.

In this article, we’ll discuss how to prepare to meet with lenders. But first, let’s explore the mortgage process and how to choose the right lender for you.

What does a mortgage lender do?

A mortgage lender is a financial institution that offers home loans for real estate purchases and refinances. They give you a loan with interest, and you pay back the loan and the interest (plus any fees and insurance) over the course of the loan until it is paid back in full. Some mortgage lenders also offer other kinds of loans, like personal loans or student loans. The types of mortgage lenders are banks, private/non-bank lenders, credit unions, and brokers.

Banks: Most banks offer loans to their patrons, and you may even be entitled to a mortgage discount just for banking with them. But banks tend to have higher interest rates than other lenders and they may take longer to close on your loan simply because of how busy they are.

Credit unions: Since most credit unions are nonprofits, they tend to offer the lowest rates. But only members are eligible for loans, and not everyone is eligible to be a member. And for those who are eligible, loans may not be available, since the credit union may limit the number of loans they give out.

Private/non-bank lenders: This category includes all private lenders that are not banks or credit unions, like Ruoff Mortgage.

Mortgage brokers: Mortgage brokers are not actual lenders. They are go-betweens who help borrowers shop around to find the right lender and loan for them. You can choose to work with whichever you want.

How to contact a mortgage lender

Once you determine that you need a loan, you will need to talk to lenders to begin the process. To find lenders, you can ask your friends, family, coworkers, and realtor who have already been through the process. They may provide recommendations, or they could help you by sharing how they found their lender and what they looked for in a lender. If you don’t have anyone to ask, you can also find lenders through an online search or use a mortgage broker. And don’t forget to ask your banks/financial institutions that you already use. You will want to talk to lenders before you make an offer on a house, as the process can take a long time, and you could miss out on a house.

Since different lenders can offer different loans, you should look into several different lenders to explore all your options. Make a list of lenders you’d like to talk to, contact as many as you need (shoot for at least three), set up appointments with loan officers and apply. Just because you apply and meet with a lender does not mean you have to get a loan through them. These are just informational meetings for both of your benefit. Meeting with many lenders helps you keep your options open, get the most information about those options, and even find the right loan officer to work with.

At the meetings, bring all of your financial documents, and be truthful, open, and honest. Do not lie. They will find out anyway, and it could affect your loan eligibility. Plus, lying doesn’t do either party any good. At this stage of the process, the more information you can offer, the better. Tell them what you are looking for, find out the interest rates and fees, have them examine your paperwork and get their input as well. They may ask to do a credit check. This is your choice to allow or not allow. But knowing your credit score enables the lender to give you accurate information regarding all the different loan options and financials, and they may even be able to help you examine your credit report for mistakes. Remember that checking your credit will cause your credit score to drop temporarily, but there is a 45-day window in which several lenders can check your credit score without causing any more of a drop in your score.

How to choose a mortgage lender

Once you have all the information and official offers, it’s time to choose a lender. But how? Do not choose a lender based on your first meeting. You should wait until you have received official offers. To choose the right deal for you, compare all the different offers and pick the one that suits you best and makes the most financial sense. Simply shopping around and comparing could save you thousands of dollars, as they all may offer different things and have different requirements. So you’ll want to ask about interest rates, fees and closing costs, PMI, down payment requirements, down payment assistance programs, etc… Keep in mind that while they will give you a rate, it could change until you have that rate locked in.

Choose a lender who is willing to answer your questions and takes time to explain everything. A good loan officer may even be able to foresee issues and help you address them before they occur. But be aware of predatory tactics and loans. If a lender tries to pressure you to sign during your first meeting or they can’t or won’t answer your questions, that is a red flag. Walk away if something doesn’t feel right, like ballooning interest rates, which is where the lender gives you a very low rate for the beginning of your loan but raises your rate significantly after a certain amount of time. Another red flag can be documents with blank spaces, which the lender could fill in after the fact with whatever they want. So be sure to read through all the documents with a fine-tooth comb and ask questions for clarification.

Prior to your meeting, there are some things you can do to prepare:

Write a list of questions.

Meeting with the lender isn’t just an “audition” to get a loan, but it’s also informational for you. When learning about the mortgage process, you’re going to have questions–it’s only natural. So ask them! Ask them everything you want to know or need clarification on. It would behoove you to prepare questions in advance and make a list to make sure you get everything answered. Here are some questions to ask a mortgage lender to help get you started: What is the interest rate? How much down payment is required? Do I have to pay Private Mortgage Insurance (PMI)? Can you suggest any down payment assistance programs? What kinds of loans do you offer and which is the right one for me? What are the fees involved? Remember, it’s in both your lender and your best interest that you communicate honestly and exchange helpful information and facts.

Get your documents in order.

The single best way to prepare for your lender meetings is to get all your documents in order, including W-2 forms, pay stubs, tax returns, social security cards, alimony/child support documents, bank statements, a list of existing debts, and paperwork for any money that you were gifted for your down payment. As mentioned above, providing all pertinent docs early will enable the lender to give you the most accurate loan information. But in addition to getting accurate information, you will need to provide all of this in order to get approved or pre-approved for a mortgage. Your lender will need to review your finances and all financial documents to verify your income, funds, and assets. They can assist if you have questions about what you need to provide.

The homebuying process really begins with pre-approval. So you should try to do this as early as possible. You’ll want to get pre-approved even before you make an offer on a house and officially apply for a mortgage. During the pre-approval process, your lender will examine your financial life (your income, savings, credit, etc…). When a lender pre-approves you, you will know exactly what loan amount they have approved for you. Pre-qualification is simply the lender’s ballpark estimate of how much you may be able to borrow, while pre-approval means the lender has actually approved you for a specific amount of money. Pre-approval means your finances have been reviewed and verified, but pre-qualification means they have not. Some sellers may outright reject bids from buyers who are not pre-approved, because they want to sell quickly and efficiently.

Do your homework.

We alluded to the fact that this process can be scary. But it can also be confusing. Your lender is there to clear up any confusion and answer whatever questions you have. But it would be helpful if you did some research before your first meeting, so you have a baseline of knowledge. Look up some typical mortgage conditions, loan types, and terminology. It will be much easier to understand the lender if you are already comfortable with their terminology like interest rate, fixed rate mortgage vs. adjustable rate mortgage, principal, etc. Take a look at our glossary to brush up on your mortgage terms.

Find out and fix your credit score.

Every lender has different eligibility requirements. But it goes without saying that the better your credit score, the better your loan options will be. For conventional mortgages, which are loans offered by most traditional lenders, you will need a minimum credit score of 620. A higher credit score enables lenders to offer you more competitive interest rates and flexible mortgage terms. A credit score under 620 would bring higher interest rates. So if you know you’ll be applying for a mortgage in the near future, find out your credit score and start working to improve it if necessary. You can raise your credit score actively and/or passively, but it will take some time. You can improve it by staying below your spending limit, reducing your credit card debt, becoming an authorized user of a parent/loved one’s credit card, making credit card payments on time, checking your credit report for errors, and keeping old credit accounts open.

Prepare a budget.

When you are pre-approved, you will be approved for a loan up to a certain amount of money, but that doesn’t mean that’s what you should or need to borrow or what you need to spend on a house. By preparing a budget prior to your meeting, the lender can look it over and make suggestions that you may not have thought of. Ensure that your budget includes all income, expenses and debts so that the lender can review it. You will also want to give them an idea of the home price range you are looking at.

The Bottom Line

Hopefully after reading this, you are a little more familiar with the mortgage process, and you have a better idea how to contact and choose a lender. Prepare before your meeting, and you will be much better off. To continue prepping for buying a home, check out Ruoff's helpful homeownership guides.