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How To Find And Choose The Right Mortgage Lender For Your First Home Loan

Written by:  

Ashley Altus

Ashley Altus

Ashley Altus

Certified Financial Counselor

Ashley Altus is a writer and certified financial counselor through the National Association of Certified Credit Counselors.

See full bio

Fact Checked by:  

Dan Silva

Dan is the Vice President of Marketplace Lending at Own Up. Throughout his career, he has held executive leadership positions in the mortgage and banking industry.

See full bio

A man and women in suits shaking hands with another woman standing next to them smiling

Researching lenders to solidify financing for a mortgage is a key step in the home buying process.

Before choosing a lender, you’ll do some shopping around – just like you’d do when making any big financial purchase. When it comes to mortgage programs, comparing loan estimates from different lenders can help save you money.

"Comparing lenders is how you find the best rate and terms for your home loan needs," says Chris Allard, lead mortgage broker at Chris Allard Mortgage Team.

While there’s no limit for how many loan applications you submit, it’s generally suggested to obtain at least three different loan estimates from three different lenders, according to the Consumer Financial Protection Bureau. It may seem like a hassle to fill out multiple mortgage applications, but comparing loan estimates could save you thousands of dollars throughout the life of the loan.

Reviewing lenders and loan options can give you the momentum you need in your home search, particularly because if you’re looking to compare quotes, you’ll have to go through a mortgage pre-approval process. Having a pre-approval in hand as you start the homebuying process will help sellers to know that you’re a serious homebuyer.

4 Factors to Consider When Choosing the Right Mortgage Lender

Completing an accurate lender comparison requires more than finding out which one will give you the largest loan amount or the lowest interest rate. There are different types of mortgages to consider in addition to lender fees, closing costs, and more.

1. The Cost of Borrowing

One of the biggest factors when it comes to mortgage shopping is cost. To start off, you’ll want to review monthly loan payments and interest rates from different mortgage companies.

There’s no question that your mortgage interest rate makes an impact on your monthly payment, but it doesn’t tell the whole story of the cost of the loan. Just because one lender may offer the lowest interest rate on the market, they may subsidize the cost by charging borrowers more fees.

"A great rate may come with some other conditions within the mortgage agreement," Allard says. "You want to ensure all potential lenders are being fully transparent about what is written in the fine print."

For this reason, you’ll have to do a line-by-line comparison of the mortgage offers you receive.

Lenders will also have a schedule of fees associated with a home loan. Common types of fees you’ll encounter include: origination fees (also sometimes referred to as lender fees), application fees, and closing costs. When comparing lenders, ask for a transparent breakdown of loan fees to help create a clear understanding about the true cost of borrowing.

2. Customer Service

You and your lender are about to become very close friends! Ensure you’ll have access to the support you need by asking who will be working with you during the loan process. Will it be a certified loan officer? Or will you be directed to a loan processor or assistant?

It’s important to know that your loan officer will be with you every step of the way. A loan officer who feels like a trusted financial advisor can help make the entire process less tedious.

Be sure to run any critical questions by your loan officer, and prior to moving forward with the lender, read as many online reviews as possible.

3. Types of Mortgage Loans

Mortgages come in all shapes and sizes and some lenders have specific types of loan programs they specialize in. While conventional loans are one of the most common loan types, you’ll also encounter government-backed mortgages and jumbo loans on your journey to choosing a lender.

Knowing the type of loan and the loan terms you’re looking for can help you make a fair comparison among lenders. For example, you wouldn’t compare a 30-year mortgage to a 15-year mortgage, as your monthly payments would drastically differ. The same goes for a fixed-rate mortgage versus an adjustable-rate mortgage. It wouldn’t be fair to compare loan estimates with different amortization schedules.

With this in mind, remember that each loan product will come with its own terms. Pay attention to which ones will benefit or impact you the most

4. Types of Mortgage Lenders

Home buyers can obtain mortgages from all different types of lending institutions. As you search for a lender, you may want to consider online lenders, credit unions, nonbank mortgage lenders, as well as national banks.

Each type of lender will have their benefits and limitations. For example, you may already have a checking and savings account at a conventional bank, which could be a convenient option. However, a nonbank mortgage lender could provide a simple loan application process and shorter approval process.

See What You Qualify For

What do Mortgage Lenders Look for?

No matter the type of lender you choose, lenders desire borrowers with excellent credit scores and financial stability. Every lender that gives you a mortgage offer will have their own borrowing guidelines for assessing an applicant’s financial situation. Your credit history, composed of credit reports from major credit bureaus, and credit score all play a role in how a lending decision is made too. Lenders will also request pay stubs, tax returns, and bank statements to evaluate your financial stability.

What to Ask a Mortgage Lender

When you meet with different loan officers or consider different lenders, you’ll want to have an honest discussion about your financial situation and the type of loan you’re seeking.

"If dealing directly with lenders, ask about any additional fees that are charged for their services, like lender fees or for things such as appraisals," Allard says.

Here are some sample questions to guide your quest to find a mortgage lender.

What to Ask a Mortgage Broker

As mortgage brokers work with mortgage lenders to find you a loan, the broker isn't a loan originator. If you choose to work with a mortgage broker instead of direct lenders, you may consider inquiring about the following:

  • How are you compensated for your services?
  • What is the estimated timeframe for finding a lender?
  • What type of guidance can you provide during the lending process?
  • How can you help me find the lowest interest rate?
  • What types of lenders do you work with?

Finding the Best Mortgage Lender for You

Choosing the best mortgage lender is a personal and financial decision for a homebuyer. Finding a financial institution that gives quality customer service with a mortgage that matches your needs can be tricky.

"Understanding what is being offered by different lenders and what you need in a mortgage loan is essential for securing the right loan for you," Allard says.

The Bottom Line

Spending a bit of time on your mortgage loan search and doing apples-to-apples comparisons of different loan estimates could pay off big!

See What You Qualify For

See What You Qualify For


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