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.
- Get your credit score in shape. The higher your credit score, the more bargaining power you’ll have.
- Know the mortgage lending landscape. We’ve done some of the homework for you below.
- Get preapproved for your mortgage. Boost your chances of having your offer accepted by getting preapproved.
- Compare rates from several mortgage lenders. You can search for the best mortgage rates online.
- 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
Ideal for first-time home buyers who want to talk to a loan officer in person or on the phone, and for homeowners who want to refinance their mortgages in 60 days or less. Chase offers a full line of mortgage products and account management tools.
Ideal for borrowers who need to be evaluated on the basis of nontraditional credit. New American Funding offers FHA and VA loans, works with down payment assistance programs, and seeks borrowers whose credit histories don't fit the mold of traditional banking.
Ideal for first-time home buyers and borrowers with less-than-perfect credit. Carrington specializing in what it calls “under-served” low-score borrowers and about 45% of borrowers have FICO scores under 650.
Ideal for borrowers who are looking to apply for a mortgage and manage the process through online tools, whether buying or refinancing. Guaranteed Rate offers FHA, VA and USDA loans for borrowers who meet robust guidelines.
Ideal for first-time home buyers or those with weaker credit. CitiMortgage, a large-scale lender with a full menu of home loan products, offers low down payment options and considers alternative credit data.
Ideal for borrowers who prefer a traditional bank. Bank of America offers a wide array of mortgages and online account management tools. It also has first-time home buyer loans with low down payments and no mandatory mortgage insurance.
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.
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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.
Best mortgage lenders: summary
- Rocket Mortgage: Best online mortgage lenders
- Chase mortgage: Best mortgage lenders for refinancing
- Quicken Loans: Best mortgage lenders for first-time homebuyers
- New American Funding: Best mortgage lenders for borrowers with bad credit
- Carrington: Best mortgage lenders for borrowers with bad credit
- Lenda: Best mortgage lenders for refinancing
- Guaranteed Rate: Best online mortgage lenders
- citiMortgage: Best mortgage lenders for first-time homebuyers and face-to-face service
- Bank of America: Best mortgage lenders for face-to-face service
Updated June 30, 2017.