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The Ultimate Guide To Choosing The Right Mortgage Lender

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2/25/2023 – Are you looking to buy a property in Montezuma County or La Plata County and wondering how to choose the right mortgage lender? You’re not alone.

Choosing the right lender can feel like a daunting task, particularly when you’re unsure of where to begin. This can be especially true in rural areas, where a wide range of different and unique properties require a professional who understands the local real estate landscape, practices, considerations, and property types. It’s crucial to remember that not every lender will be the right fit for every borrower or property. That’s why we’ve created this guide to help you navigate the process of selecting a mortgage lender that meets your specific needs. We’ll guide you through the various types of lenders in southwest Colorado, including banks, credit unions, and mortgage brokers. Additionally, we’ll provide resources to help you understand the importance of shopping around for mortgage rates and show you how to access current rates. We’ll also offer tips on how to avoid common mistakes that could lead to higher costs in the future. With our expert advice, you’ll be empowered to make an informed decision and find the perfect lender to help finance your dream property in Montezuma County or La Plata County. So, let’s get started!

Understanding the Different Types of Mortgage Lenders.

Banks and credit unions are your traditional lenders that provide a range of financial services, including mortgages. Mortgage brokers, on the other hand, are typically small local companies that specialize in originating and processing loans from multiple lenders. They can offer more competitive rates, flexible terms, and personalized service. “Mortgage Lenders” are large finance companies that focus solely on mortgage loans. They can operate as online-based companies, such as Rocket Mortgage, or they may have physical locations and operate through a branch model that sends money back to their headquarters through commission splits. However, it’s essential to note that “online lenders” can vary from highly competitive to some of the most expensive places to obtain a mortgage. Private money lenders are individuals or companies that usually provide short-term loans, but may also offer longer-term niche products for specific, highly specialized situations. Additionally, there are Farm Service Lenders, which are government-sponsored entities that offer agricultural loans to farmers and ranchers. Understanding the advantages and disadvantages of each type of lender is crucial, as the type of property can significantly impact which lender is the best fit for your needs.

Types of Lenders:

  • Community Banks: Banks are traditional lenders that offer a range of financial services, including mortgage loans. The advantages of working with a bank include their established reputation, access to in-person customer service, and mortgage options for properties that other lenders won’t touch. However, the application process can be lengthy, rates are typically a little higher, and requirements may be more stringent compared to other lenders.  Banks don’t specialize in the mortgage process so the processing is typically more cumbersome and frustrating.
  • Credit Unions: Credit unions are member-owned financial cooperatives that offer similar services to banks, including mortgage loans. Advantages of credit unions include potentially lower fees, more personalized service, and often lower interest rates. However, credit unions may have limited accessibility and fewer branches compared to larger banks.  While credit unions can be amongst the few institutions that can compete with mortgage brokers interest rates, they are typically lacking the expertise you can find at specialized companies.
  • Mortgage Brokers: Mortgage brokers are mortgage companies built around the licensed originators and processors; they specialize in having highly competent mortgage professionals.  They work independently from any individual lender and instead they offer access to a wide variety of lenders and options that are not available to the general public. They also provide highly personalized service and guidance throughout the application process.  However, borrowers need to watch out for brokers that limit their options to one or only a few lenders. Brokers with exclusive partnerships with certain lenders go against what the broker model is set up for.
  • Mortgage Lenders/Online Lenders: Mortgage lenders are finance companies that specialize in providing mortgage loans and all of them can also be considered “online lenders” these days.  Mortgage Lenders may be online only or have physical branches but the key is that they only offer mortgage financing and don’t do anything else. Advantages of working with a mortgage lender historically include quick turnaround times and streamlined application processes due to specialization. However, they often times have higher interest rates and fees than other lenders, and their customer service is much less personalized.  Borrowers may have to communicate with customer service representatives solely through digital means.
  • Private Money Lenders: Private money lenders are individuals or companies that offer short-term loans or highly specialized niche loans. Advantages of private money lenders include more flexible lending requirements and potentially quicker approval times. However, they will charge much higher interest rates and fees to offset the greater risk they take on doing less work underwriting loans.
  • Farm Service Lenders: Farm Service Lenders are government-sponsored entities that provide agricultural loans to farmers and ranchers. Advantages of Farm Service Lenders include lower interest rates and flexible terms that are tailored to the needs of farmers and ranchers. Eligibility requirements may be strict, and the application process can be more complex compared to traditional lenders.

If you’re in the market for a mortgage lender, broker, or credit union, a good place to start is with a local Google search. By searching for the most reviewed mortgage lenders, brokers, or credit unions in the area, you can find companies with a strong online presence and positive reviews from customers in the area. Reading reviews can give you an idea of the experiences other borrowers have had with a particular lender, and help you narrow down your options.

Factors to Consider When Choosing a Mortgage Lender

When choosing a mortgage lender, there are lots of things to consider but lets focus on a few important ones. The first and perhaps most obvious are the products and interest rates they offer. However, it’s important to remember that rates aren’t everything. You’ll also want to choose a lender who can guide you through the process and help you make the best decisions for your unique financial situation and circumstances.  You can also make sure there’s no surprises by choosing a lender with a trusted process.  Consider these important factors.

Do They Offer The Right Product For You?

  • If they don’t offer the loan option that will serve you best there’s a good chance they’ll try and sell you another product that will cost more. This happens a lot with borrowers who qualify for:
    • USDA loans
    • VA loans
    • Section 184 Native American loans
    • “Doctor” Loans
    • Investor Loans
    • First Time Home Buyer Loans
  • The wrong product usually means a higher rate, more expensive mortgage insurance, or larger down payment requirements.
  • That can mean big impacts to monthly cash flow, as well as your future net worth.
  • Do your own research and understand a little bit about the available options to help focus your search

Are They Responsive and Do They Make Things Easy?

  • The number one complaint about mortgage lenders is still that they don’t communicate clearly, often enough, or fast enough.
  • Do they return your phone calls, emails and texts promptly?
  • When they’re out of the office do they have out of office procedures set up and a back up person addressing calls, texts, and emails?
  • Is all of their communication clear and complete?
  • Instructions should be given step by step
  • Reminders, updates and notifications should be frequent and automatic

Do They Offer Competitive Mortgage Terms?

  • Beyond the right product mix, is the lender a low margin or high margin lender?
    • There can be a big difference in what you pay for a certain rate and it’s hard to argue it’s worth it for the average person to overpay on their mortgage because a company won some award they made up, or paid for.
    • Margin is what we call it in the industry when we’re talking about the percentage that a company makes on a loan
    • Margins can range from 1% all the way up to around 5% for the biggest lenders in the nation – A range would be somewhere around just a few thousand dollars up to tens of thousands to do exactly the same job.
    • Margins directly affect your interest rate and the difference between margin from one lender to another will directly translate into discount points paid or saved by the borrower for the same rate.
  • You can find out how competitive lenders are by talking to a few
  • Get all your rate quotes in a short period of time to minimize the affect that market movements have on your comparisons – Rates change daily, and often times throughout the day so if you take your time shopping you’re just making a mess of the comparison.  Ideally you can get a quote from all your preferred choices in the same day.  We can deliver quotes on our website without you even talking to us so if a lender cannot get you a quote in the same day, or over the phone then you should question their ability to close a mortgage.
  • Understand how pricing works and compare just a few things to keep it simple
    • The lender fee, interest rate and lock period are always tied together and can never be unlinked.  Lenders will always offer a lower rate for more money upfront(lender fee), and a longer lock always costs more.  Be sure to compare the same lock periods and rates to keep it apples to apples.
    • You can break it down to lender fee, rate, and lock period.  It’s that simple.

Are They Reputable?

  • Are they known in the community?  Will the listing agent listen to them if problems arise?  It can be challenging for a listing agent to distinguish whether issues arise from the buyer, or the lender.  Opting for a reliable lender with a credible reputation can be a wise choice if you wish to maintain confidentiality and not have to share personal details or give up leverage.  Listing agents will take the assurances of someone they know is reliable without even asking to get into the details.
  • Do they have a public reputation?  Are they concerned with their image?
    • A company concerned with their image will usually bend over backwards to make a customer happy, and/or fix any problems as they arise
    • They want to impress you so you tell your friends and family to work with them as well
  • Do they have complaints or disciplinary action taken against them?  It’s not a secret that the mortgage industry has a history of being less than perfect.  You can always look up your licensee on the NMLS.

Do They Work Quickly?

  • In this day of age speed matters
    • How fast can they get answers from underwriters?
    • How fast can they evaluate your scenario and deliver you rate options to consider?
    • How fast can they set up a loan so they can lock a rate?
    • How fast can they work through a difficult situation?
  • Response times can be the difference maker in a transaction – Having a responsive lender can mean:
    • A seller is willing to work through a difficult situation
    • You’re able to lock a rate before they rise next week
    • You get a contract accepted in a competitive market because your lender picks up the phone


Choosing the right mortgage lender is crucial when buying any property, and even more so in a rural area like Montezuma County or La Plata County.  It’s important to research and compare lenders to determine which one is the best fit for your needs and property. When in doubt, talk to someone else. By following these expert tips and advice, we hope you can make an informed decision and find the perfect lender to help you finance your dream property.

Daniel Hennek – 2/25/2023

Principal Broker – Owner

Montezuma Mortgage

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