4 Factors to Consider When Picking a Mortgage Lender
by Christy Bieber | Updated July 19, 2021 - First published on Feb. 15, 2021
Ready for a new home? Don't pick a lender without addressing these issues.
The choice of which mortgage lender to secure a loan from is an important decision. After all, you're going to be dealing with your home loan for decades to come and paying tens of thousands of dollars in interest for it.
Your mortgage is probably going to be the biggest debt you take on in your life, but the right loan should make homeownership affordable -- and becoming a homeowner is a great way to build wealth. So, how can you make sure you get the right lender for your situation? There are four big factors to consider when making your choice.
1. What types of loans does the mortgage lender offer?
There are many different types of mortgage loans, including conventional loans (not backed by the government). There are also government-insured loans, such as FHA, VA, and USDA loans. And even among conventional loans, there is variation, with some offering smaller down payments or setting larger loan limits.
If you want a specific type of loan, such as a government-backed mortgage that's easier to qualify for, you obviously need to make sure the lender you work with offers the financial product you're looking for.
2. What are the lender's qualifying requirements?
Different lenders set their own standards regarding credit score, debt-to-income ratio, down payment, and their rules for what income they count when approving you for a loan. You'll need to make sure that you can meet the qualifying requirements of a lender you're looking at.
For well-qualified borrowers, this likely won't be a problem -- except perhaps if they're looking for a mortgage with low down payment requirements. But for those looking for a bad-credit home loan, there are fewer choices, so browsing around for lenders will be especially important.
3. How does the application process work?
Some lenders offer an application process that can be completed entirely online -- sometimes without even talking to a loan officer. Others require an in-person meeting or mandate that you provide physical copies of documents.
If you want a mortgage loan officer to meet with you and walk you through the borrowing process, a lender focused on digital service won't be right for you. On the other hand, if you dread talking on the phone or visiting the bank, look for a lender that doesn't require you to connect in person or visit a local branch to submit your documents.
4. What is the cost of the loan?
Of course, cost is one of the most important factors when choosing your lender. You'll want to consider the interest rate, obviously, as well as loan origination fees and other charges the lender imposes. The goal should be to get the lowest rate from a lender offering the best overall loan terms. Fortunately, it's easy to find that many lenders allow you to compare rates online without affecting your credit.
Picking the right mortgage lender can make all the difference
With the right lender, you can have a stress-free borrowing experience and ensure your loan remains affordable over the long haul. Be sure to consider each of these factors so you can get a mortgage from a company that's a good fit for your needs.
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