When you buy a home, you’re in it for the long haul. You’ll have a mortgage payment for 15, 20 or 30 years, after all, so it’s smart to shop around to find the best mortgage lenders out there. Pick the wrong company, and you could overpay for your home loan or go with the wrong product and wind up in financial trouble.
Finding a mortgage lender involves more than just looking for a good interest rate; you want to work with the best mortgage companies, staffed by top professionals who will explain the ins and outs of the process.
Below are five tips to help you hunt for the best mortgage lender. For details on these tips, click here.
- Get your credit score in shape. The higher your credit score, the more negotiating power you’ll have with potential lenders.
- Know the lending landscape. Mortgage lending is complex; we’ve done some of the homework for you below.
- Compare rates from several mortgage lenders. You can search for the best mortgage rates online to start.
- Ask the right questions. Narrow your choices by asking for referrals or by reading online reviews. Then ask lenders these important questions about communication, fees and requirements.
- Read the fine print. Principal and interest payments on a mortgage aren’t the only costs of homeownership.
NerdWallet has researched the best available major national mortgage lenders to help you quickly find the right lender for your needs. Here are our picks, listed by category:
Best mortgage lenders for first-time homebuyers
Best mortgage lenders for refinancing
Best mortgage lenders for face-to-face service
Best mortgage lenders for borrowers with bad credit
Best mortgage lenders for first-time homebuyers
Lenders who cater to first-time homebuyers usually offer FHA loans or other programs with low down-payment requirements, as well as loans to borrowers with lower credit scores.
- Wells Fargo is one of the largest FHA lenders in the nation.
- The bank also offers its yourFirst Mortgage program, with as little as 3% down.
- It provides down payment assistance, such as LIFT grants, in selected neighborhoods.
- Quicken Loans claims to be the largest FHA lender in the nation.
- Quicken also has a 1% down payment program for qualified buyers.
- Its Rocket Mortgage app allows you to complete the application process online.
- Quicken Loans review
Best online mortgage lenders
If you prefer doing business online rather than face to face, these mortgage lenders provide an online application process.
- The company provides loan applications online and through a mobile app.
- Many financial details can be imported, reducing the hassle of compiling them yourself.
- Gives a loan decision in minutes.
- Offers online application process with secure document uploads and digital signature acceptance.
- Provides credit scores from all three bureaus for free.
- Has 170 branches across the nation for questions better handled in person.
- Guaranteed Rate review
Best mortgage lenders for refinancing
You’ve been through the mortgage process once, but are set to do it again. These lenders offer excellent home loan refinancing.
- Specializes in mortgage refinances, with no origination fees or broker commissions.
- Minimum 640 credit score qualification.
- A suggestion engine will look at the info you provide and determine if there are things you can do to lower your rate.
- Lenda review
- Chase consistently offers some of the lowest refinance rates among major national lenders, according to the NerdWallet Mortgage Rate Index.
- Offers the HARP federal refinance program to eligible homeowners.
- Chase also writes FHA and VA refinance home loans.
Best mortgage lenders for face-to-face service
If you want to talk to a mortgage loan officer, you’ll find these lenders have offices across the nation and likely in your neighborhood.
- Provides an online tool that keeps you up to date on the status of your mortgage application.
- Mortgage specialists to assist in the loan process.
- Offers an online home value estimator.
- Perennially one of the highest-volume mortgage lenders in the country.
- You can upload loan documents securely online and track your loan’s process.
- Offers jumbo purchase loans and refinances for higher-value homes.
Best mortgage lenders for borrowers with bad credit
If you have little or no credit history, or even bad credit, talking to a mortgage broker might be your best bet.
In your search for the best mortgage lender, enlisting the help of a mortgage broker who does the shopping for you can save time and reduce hassle.
Get advice from a mortgage brokerLet our expert mortgage brokers shop 1,000+ options to find you the best home loan.Fill out the form below and have an expert mortgage broker reach out to help you with your mortgage.
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5 tips for finding the best mortgage lenders
To get a jump-start on the mortgage loan process, use these five tips to find the best lender for you.
1. Get your credit score in shape
Not everyone can qualify to buy a home; you have to meet certain credit and income criteria to assure mortgage companies you can repay your loan.
A low credit score signals that lending to you is risky, which means a higher interest rate on your home loan. The higher your credit score and the more on-time payments you make, the more power you’ll have to negotiate for better rates with potential lenders. Generally, if you have a score under 580, you’ll have a tough time qualifying for most types of mortgages.
To build your credit score, first make sure your credit reports are accurate and free of errors. Get your report from the three major credit bureaus: Equifax, Experian and TransUnion. Each is required to provide you with a free copy of your report once every 12 months.
Next, try to pay off high-interest debts and lower your overall level of debt as quickly as possible. By lowering your debt, you’ll improve your debt-to-income ratio. Paying off credit cards and recurring loans before you buy a home will also free up more money for the down payment.
2. Know the lending landscape
It’s difficult to discern who the best mortgage lenders are in a crowded field. Here are the most common types of lenders you’ll choose from:
- Credit unions: These member-owned financial institutions often offer favorable interest rates to shareholders. And many have eased membership restrictions, so it’s likely you can find one to join.
- Mortgage bankers: Bankers who work for a specific financial institution and package loans for consideration by the bank’s underwriters.
- Correspondent lenders: Correspondent lenders are often local mortgage loan companies that have the resources to make your loan, but rely instead on a pipeline of other lenders, such as Wells Fargo and Chase, to whom they immediately sell your loan.
- Savings and loans: Once the bedrock of home lending, S&Ls are now a bit hard to find. But these smaller financial institutions are often very community-oriented and worth seeking out.
- Mutual savings banks: Another type of thrift institution, like savings and loans, mutual savings banks are locally focused and often competitive.
You can, and should, check if each lender you consider is registered in the state you’re shopping in through the Nationwide Multistate Licensing System Registry. Also, search the Better Business Bureau for unbiased reviews and information.
3. Compare rates from several mortgage lenders
This is where homework and a lot of patience come into play. As noted, there are all kinds of mortgage lenders — neighborhood banks, big commercial banks, credit unions and online mortgage lenders. You have more options than ever.
You can search for the best mortgage rates online to start. Keep in mind that the rate quote you see online is a starting point; a lender or broker will have to pull your credit information and process a loan application to provide an accurate rate, which you can then lock in if you’re satisfied with the product.
Once you have several quotes in hand, compare costs and decide which one makes the most financial sense for you. Use your research as leverage to negotiate for the best mortgage rates possible.
While there’s more to finding a good lender than picking the lowest rate, that doesn’t mean it isn’t important. The total interest you pay on over the life of the loan is a big figure, and a low rate can save you thousands of dollars.
4. Ask the right questions
Picking the right lender or broker to work with can be tricky. Narrow your choices by asking for referrals from friends, family or your real estate agent, or by reading online reviews. Once you have some names, it’s time to ask:
- How do you prefer to communicate with clients — email, text, phone calls or in person? How quickly do you respond to messages?
- How long are your turnaround times on preapproval, appraisal and closing?
- What lender fees will I be responsible for at closing? (Fees may include commission, loan origination, points, appraisal, credit report, and application fees.)
- Will you waive any of these fees or roll them into my mortgage?
- What are the down payment requirements?
Note: If you’re looking for low down-payment options, a loan backed by the Federal Housing Administration, Veterans Affairs or Department of Agriculture might be your best bets.
Also, check with your mortgage lender or broker if buying points to lower your rate makes sense. With this strategy, you’re basically paying some interest upfront in exchange for a lower rate on your mortgage. Generally, one point equals 1% of the loan amount. For example, on a $200,000 mortgage, 1 point would cost $2,000 and could lower your interest rate by 0.25%.
This might be a good cost-saving move if you plan on living in the home for a long time. “Even though you pay additional points upfront to do so, you can save thousands of dollars in interest expense over the life of your loan,” says James Dowd, a San Francisco-based financial advisor and accountant.
5. Read the fine print
Principal and interest payments on a mortgage aren’t the only costs of homeownership; you should ask your lender about other costs such as estimated closing costs, points, loan origination fees and transaction fees — and ask what each fee includes. If you are unsure of something, ask the lender for an explanation.
Some mortgage lenders will require an “earnest money” deposit to start the loan process. However, be wary of contracts specifying that the earnest money will be kept regardless of whether the lender offers a loan or the loan closes, says Kevin Stophel, a financial planner and advisor in Chattanooga, Tennessee. Ask the lender to specify under what circumstances the earnest money will be kept, and if the answer is vague, keep shopping around.
Don’t forget to examine the fine print of your loan documents, particularly the initial Loan Estimate and the Closing Disclosure. These will tell you the exact finance terms, who pays closing costs, what items are and aren’t included in the home, whether there’s a home inspection contingency, the closing date, and other important details.
More from NerdWallet
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Compare mortgage rates
Find a mortgage broker
Deborah Kearns is a staff writer at NerdWallet, a personal finance website. Email: dkearns@nerdwallet.com. Twitter: @debbie_kearns.
Steve Nicastro is a staff writer at NerdWallet, a personal finance website. Email: Steven.N@nerdwallet.com. Twitter: @StevenNicastro.
This article was updated Aug. 2, 2016. It was originally published April 8, 2014.
from NerdWallet
https://www.nerdwallet.com/blog/mortgages/5-tips-finding-mortgage-lender/
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