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- Decide whether to deal directly with the lender or use an intermediary and find a company that offers the type of mortgage you need.
- By applying for pre-approval from multiple financial companies, you can compare interest rates and loan amounts.
- Loan quotes help you check interest rates, closing costs and monthly payments for different companies.
Choosing the best mortgage lender is one of the most important decisions in the home buying process. The lender you choose determines how much you can borrow, the interest rate, and the fees you pay. Here are some tips for choosing a financial institution that fits your needs.
Please select a mortgage type
There are many different types of lenders, each with different details, such as how they access loan funds. But as a consumer, he’ll probably focus primarily on two types of financiers next.
- direct lender. You work one-on-one with a direct financier, who provides the loan. Direct lenders are banks, credit unions, or financial companies such as Better Mortgage and Carrington.
- mortgage broker. A mortgage broker is an intermediary between you and the lender. Brokers can help you compare lenders and find the best deals, but you may have to pay the broker a fee.
Choosing between these two can be difficult as some lenders only work with brokers and others don’t work with brokers at all. Brokers do a lot of the work for you, but if you just want to compare a few possible options, you may prefer working directly with the lender.
Find a lender that offers the type of mortgage you need
Not all financial institutions offer each type of mortgage. For example, Lender A may only offer Matched Mortgages and Jumbo Mortgages, but your credit score is too low to apply for either. Perhaps it’s best to go with Lender B, who offers her FHA mortgages for those with low credit scores.
Most lenders have matched mortgages and jumbo mortgages. A conforming mortgage is what is considered a “regular” mortgage, while a jumbo mortgage is a high-value mortgage. However, if you need a specific type of loan, see Insider’s list of the best lenders by type.
- FHA Mortgage Lender. Lenders with Federal Housing Administration-backed mortgages cater to borrowers with lower credit scores and smaller down payments than lenders that focus on matching mortgages.
- VA Mortgage Lender. Lenders with VA-backed mortgages are working with active-duty military and veterans to get loans with no down payment.
- USDA mortgage lenders. USDA-backed mortgages are aimed at low- to moderate-income borrowers buying rural homes, and most lenders do not require a down payment.
How to Compare Mortgage Lenders at Each Stage of the Process
Mortgage pre-screening
A mortgage pre-approval is one of the first steps in the home buying process. When you apply for prequalification, you provide the lender with your financial information, such as your credit score and income. The lender will then give you a quote on how much they can loan you, what types of mortgages are available, and how much interest you can pay.
The information displayed at the time of pre-screening is not fixed, but by applying to multiple financial institutions, you can narrow down your search by comparing basic details. For example, you may be eligible for a matching mortgage with one lender but not with another lender because they require a higher credit score.
Mortgage pre-approval
Mortgage pre-approval is similar to pre-approval, but there are important differences. Apply for pre-approval when you’re ready to start buying a home. With pre-approval, the lender will review the financial information you provided and provide a more specific estimate of how much you can pay and how much the loan will cost. Applying for pre-approval from multiple financial institutions allows you to compare public mortgage rates.
Try to limit the application period to 30-45 days. The lender will conduct a hard credit investigation when processing your pre-approval application. Unless you’re shopping for the best rates, a large number of tough reporting questions can negatively impact your credit score. If you limit your interest rate shopping to a month or so, the credit bureaus will understand that you’re looking for a home and shouldn’t put an individual search against you.
home loan quote
After choosing a home, apply for a mortgage and receive a loan quote from your financial institution. The quote includes all the costs of buying a home, including the amount you can borrow, the interest rate, an itemized list of closing costs, and additional fees such as prepayment penalties. The last page contains numbers to easily compare your offer with other lenders’ offers.
Of the qualifications, pre-approvals, and loan quotes, the loan quote is the most detailed and formal of the three. Receiving this document from multiple lenders will help you compare details.
Please read all documents carefully
Read the pre-approval letter and loan quote carefully to make sure you understand what you are paying each lender. If you are unsure of the period or fee, do not hesitate to ask the company.
Once you have selected a lender, you will receive a transaction completion disclosure at least 3 days prior to closing. The closing disclosure provides a detailed overview of your mortgage, and you should read the fine print to make sure you’re correct, compare it to the loan quote, and ask questions if you have any.
You can hire an attorney to read your final disclosures, but be prepared to pay hundreds of dollars.
