Finding the right USDA mortgage lender is a big part of the USDA loan process. Choosing the wrong lender could lead you down a rocky path. It could even leave you without a USDA loan. Before you jump in headfirst, consider shopping around for a lender. Just like you comparison shop for appliances or other large purchase in your life, do the same for the USDA loan. When you shop around, you have a better chance at securing not only the best rate, but having the best lender at your side. The USDA loan process is simple when you use the right lender, but not all lenders are created equal.
Different Types of Lenders
There isn’t a mold that USDA lenders must fit into. They come in many varieties. You may find a few large, well-known banks that offer them. You will also find smaller, privately owned banks that offer USDA loans. The one you choose should be based on your preference. Some people prefer the security of using a large, well-known bank because of their reputable history. Others prefer the most distinct level of customer service they receive from smaller banks who know them by name. The choice is yours.
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Look at the USDA Mortgage Lender Guidelines
Each bank, whether large or small, will have different guidelines. There are the USDA guidelines that every USDA lender must follow. Then there are the additional guidelines the lender places on the program. There is no rhyme or reason between large and small lenders – they each have their own requirements.
A benefit you may receive if you choose a smaller lender is more personalized service. If you find a lender has strict rules, you may work closely with the loan officer to figure out how to meet them. A larger bank may be more black and white. If you do not meet the guidelines, you do not get the loan. A smaller bank, on the other hand, may have the ability to bend the rules slightly. They may look at other qualifying factors on your loan and go ahead and approve you for the loan.
Factors to Consider
Choosing a USDA mortgage lender is really a personal decision. Following are a few things to take into consideration when you decide:
- How quickly does the lender get back to you? How quickly do you expect an answer?
- Does the lender seem to be upfront about all fees involved with the loan?
- Do you know anyone else who has used this lender for a USDA loan?
- What type of experience does the lender have with USDA loans?
- What is the normal turnaround time for USDA loans at this lender?
The Role of Experience
The lender’s experience with USDA loans is probably the most important factor you should consider. Of course, you want a lender who will provide the level of service you desire. You also want one that provides a competitive interest rate and fees. However, the level of experience they have with the USDA loan could make or break your chances of approval.
The USDA loan works a little differently than other government-backed programs. With other loans, the lender has full say in which loans get approved. This means they do not have to send a full loan package to the VA or FHA and wait for approval. The USDA does require this, though. The USDA approved lender must send a full underwriting package once the bank’s underwriter approves the loan. The file must be sent to the USDA regional office in your area. From there, the USDA goes over the loan to make sure their requirements are met. If there are any missing pieces, it could delay the approval.
If you work with an inexperienced USDA lender, you could be in the delayed category. The USDA does not wait until you send the documents in and then leave you in the same place in line. Instead, you would have to wait for your turn again. This could mean delaying your loan for several weeks. If you are waiting to close on a purchase contract, this could void your agreement to have final approval for financing by a specific date.
Because this step is out of your hands, the best thing you could do is find a lender with the right level of experience. Make sure you ask about their experience as well as their ability to get a loan approved with the USDA the first time around.
Of course, you should always compare 3 to 4 offers provided by various lenders. Don’t just assume the first lender that provides you with an interest rate and fees within your range is the right one for you. It is important to find out what else is available out there. Some lenders charge lower fees and/or interest rates. What if you could save money? Even 0.5% in the interest rate could save you thousands of dollars over the life of the loan.
You should also compare the ability of different lenders to handle your situation. Don’t hide any details of your loan application when you first contact lenders. You must know without a doubt that they will approve you for the loan. If you wait to surprise them with an important detail, such as employment gap or higher debt ratio, it will only hurt your chances of approval in the long run.
Choosing the right USDA mortgage lender is not as difficult as it sounds. The internet offers the easiest way to find the right lender for you. This means you do not have to restrict yourself to the local banks. You can apply for a USDA loan with any USDA approved lender that can do business in your area. Take the time to call around and talk to different loan officers. Ask them the above questions, plus any of your own. Only then can you make a distinct decision regarding with USDA mortgage lender is right for you.