Buying a home can be overwhelming if you don’t know where to start. For one of the biggest purchases of your life, you want to feel confident. That’s why choosing the right mortgage lender is so important. Not only will they be helping you buy the home of your dreams, but this is the beginning of a working relationship that could last up to 30 years. It’s critical to choose a lender that has experience with your particular mortgage needs and can get you a rate and payment options that make sense for your situation.
Of course, lenders aren’t one-size-fits-all. There are better lenders for different types of buyers, including first-time home buyers, buyers with poor credit, and people seeking a refinance on a current abode.
What qualities should you seek in a mortgage lender? Let’s take a look at what some industry insiders have to say.
What to look for in a mortgage lender
What type of mortgage are you looking for? It may seem like a small distinction on the surface, but the mortgage type you’re looking for can make a big difference in the lender you choose. Financial institutions can specialize in a variety of mortgage types, including:
- Fixed rate
- Adjustable rate
- Federal Housing Administration (FHA) loans
- Veterans Affairs (VA) loans
- Jumbo loans (large loans over $424,100 in most areas)
- Home equity loans
- Lines of credit
- Hybrid mortgages (starts off with a fixed rate, then becomes adjustable after first 10 years of the loan)
- Reverse mortgages (for older homeowners, borrow against the value of your home with no monthly mortgage payments)
If it’s your first time buying a home, you’re going to have a lot of questions. To this end, you’ll want a lender that focuses on customer service.
You may also need a bit more financial help depending on your age and income. So, it’s a good idea to find a lender that knows its way around FHA loans and other programs with low down payment requirements.
Schachter recommends finding a lender that doesn’t only approve perfect-credit, high-worth buyers. “Many times these are out of the realm of their portfolio products, and they don’t focus on the smaller, lower loan amount mortgages. Also, a lender that is a broker (meaning they offer mortgage loans from a variety of lenders) or a banker can offer more product selections.”
Here are five factors to consider when seeking a mortgage lender:
1. Speed and accuracy
Richard Frunzi, president of Mortgages USA, says speed and accuracy are key. “Most major lenders take 60 to 90 days to close a mortgage. However, a lender with best-in-class service can close a mortgage in as little as three weeks.”
2. Focused on customer service
Frunzi says it’s important to find a lender with a focus on customer service “who is freely available to answer all the questions that a new buyer naturally will have.”
3. Keeps up with industry trends
Frunzi says that a mortgage lender with a focus on continuing education is a must. “A licensed loan officer who takes ongoing training is often more knowledgeable about new products and changes in the industry.”
4. Good customer reviews
It’s become fairly easy to do your own research on just about any company these days. Jeremy David Schachter, a mortgage adviser at Pinnacle Capital Mortgage, suggests checking out past clients reviews on verified sites to get a sense of a lender’s reputation in the industry.
5. Personal recommendations
While similar to customer reviews, getting a personal recommendation is even better since you know the messenger. Schachter says, “Ask for recommendations from your Realtor, friends, coworkers, and family.”
What is the primary purpose of your loan?
While many will use it for a primary residence, mortgages can also be used for investment properties, house flipping, or estates, trusts and retirement. Look for a bank that excels at working with mortgage products that fit your specific needs.
You may want to weight the benefits of working with a banker or a broker. Bankers usually work directly for one financial institution, while brokers work with several institutions to shop for a loan. Brokers can save time by helping to shop around quickly, but they may take a percentage of the loan as a brokerage fee. Bankers, by working for the lending institution, eliminate the middle man in the process.
Another consideration is the growth of online-only banks and lenders. For more tech-savvy consumers, managing monthly payments and chatting through problems online or via a smartphone may be preferable. For other mortgage buyers, the ability to go into a branch and talk to someone you know personally may hold greater appeal.
Get recommendations. Working with a mortgage lender is a service relationship, and getting references from friends and family can help the process.
“The first place to start for any large purchase, especially a home mortgage, is with trusted advisers and friends,” says Steven A. Bogan, regional managing director for Glendenning Mortgage Corp. “Not for, ‘I think my cousin’s neighbor does mortgages now,’ but to find out if they have worked with anyone recently and whether their loan originator was knowledgeable and responsive. Ask several sources and see if some of the same names come up.”
Compare rates and fees
Mortgage interest rates and fees can change relatively quickly during your home search. Consult several different mortgage companies to see which will offer you the most competitive rates. Also consider what the other fees and closing costs associated with the loan will be and how that will affect the total amount you need to pay. One way to do this is through a loan estimate from a lender. This form is a detailed document that will outline expected interest, payment amounts and closing costs. Lenders only give loan estimates after you have applied for a loan, and such an action results in a hard pull on your credit, which affects your credit score. Make sure you have narrowed it down to a few finalists before proceeding with any loan estimates.
A home may be one of the largest, if not the largest, purchase you ever make. Being comfortable with the company and person or people handling your loan is paramount.
“I would ask several lenders questions and really listen to their answers,” says Mary Anne Daly, senior mortgage adviser at Sindeo.
“Ask if they are a banker or a broker and what they consider to be the advantages. Ask if they are compensated based on loan size, and if so, how you can be sure if your loan is smaller that you’ll receive the same attention as a jumbo loan client. Ask the lender what upcoming economic reports may influence rates and what is their opinion on the direction rates are headed. Run if the answer includes the phrase ‘If I had a crystal ball….'” – Mary Anne Daly, senior mortgage adviser
Things to consider
Many types of home loan programs have specific requirements, such as VA loans that are only available to most of those in the military, veterans, reservists and National Guard members. Likewise, many lenders have their own requirements. Many only offer loans to borrowers with good to excellent credit. If your credit isn’t ideal, don’t apply for a loan with a company that states it only accepts borrowers with a credit score of 720 or above. Make sure you’re only applying for loans that you think are achievable for your situation. Talking to a trusted mortgage specialist can help you identify the best solutions for you.
How large of a down payment are you planning to make? The industry standard for home loans is 20% down. However, newer lenders, as well as programs such as FHA loans and VA loans, are allowing borrowers to pay anywhere from 0% to 10% down. Some lenders are able to offer loans with smaller down payments without requiring the buyer to pay private mortgage insurance (PMI). If saving 20% down for a new home doesn’t seem reasonable, consider a bank such as Sofi that specializes in lower down payment loans. You may also want to consider what is known as a piggyback loan. This is where you take out two loans: one for 80% of the value of the home, and another loan to cover the cash needed to reach a 20% down payment and avoid PMI.
Also to consider is how quickly you need the loan? There are many parts of the process in obtaining a home loan. Depending on what tools and resources a financial institution has at its disposal, the time needed from start to finish in the loan process can vary by weeks.
“Ask potential lenders how much of your loan will be processed in-house,” says John Walsh, CEO of Total Mortgage Services. “Not all companies keep their loan officers, processors and underwriters in the same location, and that has the potential to lead to disconnects and a slower overall pace.”
Best mortgage lenders for first-time homebuyers
Quicken Loans is the second-largest retail home loan lender in the United States. It not only offers competitive, low rates but also offer a hybrid approach to its application and loan management process. After starting an application online or on a smartphone using Quicken’s Rocket Mortgage program, consumers can get a decision quickly. Once approved, customers are then assigned a personal account representative. Quicken was the No. 1 FHA lender for 2016 and has plenty of experience with customers with poor to fair credit.
Social Financial, or SoFi, is an online-only financial institution that helps first-time homebuyers by offering loans that don’t require a 20% down payment. Typically, this would require the homebuyer taking on private mortgage insurance (PMI), but SoFi allows consumers to pay as little as 10% down and avoid PMI. For borrowers with good to excellent credit, SoFi also offers competitive interest rates, without many of the lender fees typically associated with the mortgage process.
This bank also offers FHA loans, as well as other loan options with low down payments.
Best mortgage lenders for veterans
Veterans United is the largest provider of VA loans in the United States, with more than 100,000 loans closed for military families and veterans. While many other banks offer VA mortgages as part of its product line, Veterans United only works with VA mortgages and refinancing. This makes it uniquely qualified to deal with veterans and help them get the most from their homebuying experience.
Similar to Veterans United, USAA strictly deals with military members, veterans and their families. However, USAA also offers other financial products such as life and auto insurance for those who served. USAA offers strong fixed-rate mortgages and not those with adjustable rates, which can increase payments over time. This security is ideal for someone living off a fixed income, such as a military pension and/or disability payments.
Best mortgage lenders for refinancing
Speed is often of the essence in refinancing, since you want to lock in a good interest rate. Frunzi says, “In today’s fast-paced market, a lender that utilizes a high degree of automation and access to varied products can be advantageous in quickly closing a loan without the need for an expensive 60-day lock.”
Schachter, once again, advises finding a lender that is a broker and a banker to have a variety of potential lenders at your fingertips when seeking a refinance.
Refinancing is easier than it used to be because so many online lenders have automated certain parts of the process. Here are four lenders that have cut out the middleman and made refinancing simpler, faster and, in many cases, cheaper.
Founded in 2002, AHC Lending is a direct mortgage lender, which helps consumers in two ways. First, it helps speed up the mortgage and refinancing process by cutting out the middleman. Second, this streamlining means AHC doesn’t charge any lender fees. AHC also has the advantage of accepting people with fair credit, a hurdle that many refinancers may face.
A division of Prospect Holding Co., one of the largest mortgage companies in the nation, CapWest Mortgage has an A+ rating from the Better Business Bureau. CapWest sets itself apart by approving mortgages in-house. Not only does this help expedite the mortgage process, it makes it easier for CapWest to consider individual circumstances and approve borrowers that may not be considered by other lenders.
Best mortgage lender for jumbo loans
Quicken Loans is the second-largest mortgage lender in the country, but it also treats its customers well. Quicken has ranked first in the J.D. Power mortgage origination satisfaction survey for seven years in a row. Quicken also has a simple online application that connects borrowers to a personal mortgage specialist after submitting the application. Quicken offers loans with a maximum of $3 million, which is great for borrowers seeking jumbo loans.
Sebonic uses a quick and easy online application system but really sets itself apart because of the variety of options it provides consumers. It issues jumbo loans up to $3 million, with some of the most consistently lowest rates in the industry. Sebonic Financial also offers interest-only jumbo mortgages for payment structures that fit any type of situation.
Best mortgage lenders for reverse mortgages
American Advisors Group, or AAG, specializes in reverse mortgages that can help retirees cover their retirement expenses. AAG is the largest reverse mortgage lender in the nation, closing more federally insured Home Equity Conversion Mortgage (HECM) loans than any other company last year. For those with larger properties, AAG is also one of the few lenders in the country that offers a jumbo reverse mortgage.
Best mortgage lenders for poor credit
Frunzi says a customer with credit challenges should seek a lender with a suite of different mortgage products. “Banks and large institutions may only offer their own products, whereas a smaller mortgage lender may have access to a wide range of mortgage products offered through partners and investors.”
Once again, Schachter says finding a lender that is both a broker and a banker can be useful for buyers with poor credit. He also recommends “a lender that may not be a portfolio lender (keeping the loans in-house), where you could have stricter overlays or more guidelines to follow.”
Here are three to consider:
Quicken is a good lender if you have poor credit as they accept lower credit scores than many banks, especially for FHA loans.
HomeBridge is a direct lender that also accepts lower credit scores than many banks.
You can check your approval quickly a loanDepot with only a soft credit pull, meaning it won’t show up on your credit report. The company offers a wide variety of mortgage loans.
The Money Store is a direct lender that offers a multitude of products and services for borrowers of all ages and financial situations. Its website is simple and straightforward, allowing you to fill out a basic form and get a quote quickly. The Money Store also accepts applications over the phone in 40 states and the District of Columbia.
FAQ on mortgage lenders
What should I look for when choosing a mortgage lender?
Here are five tips to help you choose a mortgage lender when buying your first home.
- Know your credit score and history.
- Ask about first-time home buyer programs.
- Seek lenders who offer government-backed home loans.
- Compare interest rates and more.
- Get pre-approved before house shopping.
Is it better to get a home loan from a bank or lender?
There are several advantages to using an independent mortgage broker over a bank or mortgage banker. Brokers have several lenders they can submit your loan application to. This makes them an attractive option, especially for borrower’s with difficult loans such as low credit scores, or income issues.
Does shopping around for a mortgage hurt credit?
You can shop around for a mortgage and it will not hurt your credit. You can shop around and get multiple pre-approvals and official loan estimates. The impact on your credit is the same no matter how many lenders you consult, as long as the last credit check is within 45 days of the first credit check.
How far back does a mortgage credit check go?
Mortgage lenders will typically assess the last six years of the applicant’s credit history for any issues.
How many times do Mortgage Lenders check your credit?
When borrowers apply for a mortgage loan, their mortgage lenders run their credit at least once. Whether these lenders check their borrowers’ credit more than once during the lending process is a matter of personal preference. There are no firm rules in place forcing lenders to run a credit check more than once.
How to get the home of your dreams
The homebuying process can be stressful. However, there are certain things that can be done to make you feel more comfortable. Asking questions will be your best tool during the entire process, whether that’s recommendations from friends or hard-hitting questions from a banker or broker. Once you understand the type of mortgage you need, head to our home loans page to find the company that can best meet those needs.