Lending Q & A

I recently received a few questions about lending from a first-time home buyer. I thought I'd post my response to her questions here.

Q: When shopping around for the best interest rates, do you actually fill out pre-approval applications for different financial institutions?

A: At first, all you need is a pre-approval letter. I usually just go to my bank. Once you are under contract, then look at two or three lenders and ask them to create a good faith estimate (GFE) for you. The GFE will let you compare the lenders based on the actual property.

Q: How many lenders should you look into before deciding?

A: I think it is worth talking to two or three. Past that, and you get diminishing returns.

Q: Once you have decided on the company you wish to go with, do you contact the other banks to have them withdraw your application?

Yes. But it's too early in the process to think about that.

Q: Is it a good idea to go to LendingTree.com? If not, why?

A: Lending Tree can be a mixed bag. They make their money through referral fees to lenders. The success of the loan is predicated on the actual lender. Lending Tree is just a middle man. They are okay, but not necessarily the best deal out there.