5 Tips for Finding the Best Mortgage Lenders

Mortgage Process, Mortgages
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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. Keep reading for tips on how to shop around.

How to look for a lender

Finding a mortgage lender involves more than just getting a good interest rate; you want to work with the best mortgage companies, staffed by professionals who will guide you through the process.

Below are five tips to help you hunt for the best mortgage lender. For details, click here.

  1. Get your credit score in shape. The higher your credit score, the more bargaining power you’ll have.
  2. Know the mortgage lending landscape. We’ve done some of the homework for you below.
  3. Get preapproved for your mortgage. Boost your chances of having your offer accepted by getting preapproved.
  4. Compare rates from several mortgage lenders. You can search for the best mortgage rates online.
  5. Ask the right questions and read the fine print. Find out about requirements and fees, including costs beyond principal and interest payments.

NerdWallet has researched some of the best available major national mortgage lenders to help you quickly find the right lender for your needs.

NerdWallet’s best mortgage lenders

 

Min. credit score

620

Min. down payment

1.0%

Why we like it

Rocket Mortgage, an online mortgage pioneer, offers a fully automated mortgage experience that's super quick and backed by the experience of Quicken Loans.


Min. credit score

620

Min. down payment

1.0%

Why we like it

Quicken Loans, the largest online lender, combines approval speed, national reach and cutting-edge technology. It's also the leading FHA lender in the country.


Min. credit score

620

Min. down payment

3.0%

Why we like it

New American Funding is a full-service lender that offers underwriting flexibility, low down payment programs and strong online tools.


Min. credit score

550

Min. down payment

3.0%

Why we like it

Carrington specializes in helping borrowers with low credit scores and other credit challenges qualify for FHA mortgages and VA loans. They also offer conventional and jumbo loans.


Min. credit score

620

Min. down payment

5.0%

Why we like it

Lenda, one of a new breed of online lenders, offers a fully digital experience for tech-savvy borrowers who know their way around the web.


Learn more

at Guaranteed Rate

Min. credit score

620

Min. down payment

3.0%

Why we like it

Guaranteed Rate, an experienced national lender with a robust suite of home loan products, combines a speedy, fully online mortgage process with a solid brick-and-mortar presence around the country.


Min. credit score

620

Min. down payment

3.0%

Why we like it

Chase, a traditional bank with a national presence, can be a great choice if you're looking for a lender with a wide selection of mortgage loans and strong online tools.


Min. credit score

620

Min. down payment

3.0%

Why we like it

CitiMortgage is a full-service lender with all the loan types you might need, a national presence and low down payment options — and they consider those with not-so-great credit histories.


Learn more

at Bank of America

Min. credit score

620

Min. down payment

3.0%

Why we like it

Bank of America combines the reassuring presence of a nationwide, traditonal bank lender with powerful online tools and capabilities. It offers government and conventional loans, as well as low down payment programs.



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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.

» MORE: Create an account for personalized credit building tips.

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.


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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. GET PREAPPROVED

Taking the time to get a mortgage preapproval letter before you start looking at houses is important. It can put you head and shoulders above other buyers who may be interested in the same house you want to bid on. It does that by showing the seller that a lender has evaluated your finances and figured out how much you can afford to borrow, and therefore how much house you can afford.

The truth is, if you’re not preapproved, you’ll probably be the only one at the open house who isn’t and will therefore face a big disadvantage when making your offer.

To get preapproved, you’ll have to provide lenders with a fair amount of financial information. It’s worth the effort, because it shows sellers your offer on their home is likely to close. It can also make getting a mortgage a little easier, if you get your home loan from the same lender, because the lender will already have financial information about you that’s essential to getting a mortgage.

Here’s a list of what you’re likely to have to provide to get preapproved.

  • Social Security numbers for yourself and any co-borrowers
  • Bank, savings, checking, investment account information
  • Outstanding debt obligations, including credit card, car loan, student loan and other balances
  • Two years of tax returns, W-2s and 1099s
  • Salary and employer information
  • Information about how much of a down payment you can make, and where the money is coming from

It’s a good idea to contact more than one lender during the preapproval process. One might offer convenient online preapproval, while your local credit union could help you overcome any preapproval barriers you face. Getting preapproved will help you find a mortgage lender who can work with you to find a home loan with an interest rate and other terms suited to your needs.

4. 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 over the life of the loan is a big figure, and a low rate can save you thousands of dollars.

» MORE: Use our mortgage calculator to find out your monthly mortgage payment.

5. Ask the right questions and read the fine print

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, Department of Veterans Affairs or Department of Agriculture may be your best bet. However, keep in mind that more and more lenders are offering low-down-payment options on mortgages that aren’t backed by a government program.

Also, check with your mortgage lender or broker if buying points to lower your rate makes sense. If you buy points, you’re paying some interest upfront in exchange for a lower rate on your mortgage.

This might be a good move if you plan on living in the home for a long time.

Remember, principal and interest payments on a mortgage aren’t the only costs of homeownership; you should ask your lender about others, including closing costs, points, loan origination fees and other transaction fees. If you’re unsure of something, make sure you ask for an explanation.

Most mortgage lenders will require an “earnest money” deposit to start the loan process. 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 on your loan documents. These will tell you the exact finance terms, who pays which closing costs, what items are and aren’t included with the home, whether there’s a home inspection contingency, the closing date and other important details.

 


 

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NerdWallet’s selection of mortgage lenders for inclusion here was made based on our evaluation of the products and services that lenders offer to consumers who are actively shopping for the best mortgage. The six key areas we evaluated include the loan types and loan products offered, online capabilities, online mortgage rate information, customer service and the number of complaints filed with the Consumer Financial Protection Bureau as a percentage of loans issued. We also awarded lenders up to one bonus star for a unique program or borrower focus that set them apart from other lenders. To ensure consistency, our ratings are reviewed by multiple people on the NerdWallet Mortgages team.

Steve Nicastro is a staff writer at NerdWallet, a personal finance website. Email: Steven.N@nerdwallet.com. Twitter: @StevenNicastro.

Updated June 30, 2017.