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Before you start the fun parts of home shopping (like testing out freshly baked cookies at open houses), you'll need to do some of the boring parts. To start, you'll need to choose a mortgage lender. We've spent hundreds of hours researching lenders, and below you'll find a list of our favorites.
Better: No unnecessary fees, low mortgage rates -- and Better states applicants can be pre-approved in minutes.
Interested in diving deeper? Grab our full list below, along with expert recommendations on topics like choosing a mortgage lender and getting a great mortgage rate.
Lender | Best For | Next Steps |
---|---|---|
2024 Award Winner
Better
Rating image, 4.5 out of 5 stars.
4.5/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor
Rating image, 4.5 out of 5 stars.
4.5/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Best For
No unnecessary fees and 100% online application |
Check Rates for Better
On Better's Secure Website. |
Veterans United
Rating image, 4.0 out of 5 stars.
4.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor
Rating image, 4.0 out of 5 stars.
4.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Best For
VA loans |
Check Rates for Veterans United
On Veterans United's Secure Website. |
2024 Award Winner
Rating image, 5.0 out of 5 stars.
5.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor
Rating image, 5.0 out of 5 stars.
5.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Best For
Top customer service and streamlined online app |
|
Rating image, 5.0 out of 5 stars.
5.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor
Rating image, 5.0 out of 5 stars.
5.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Best For
Diverse loan products and cash back rewards |
|
Rating image, 4.5 out of 5 stars.
4.5/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor
Rating image, 4.5 out of 5 stars.
4.5/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Best For
Diverse loan types and terms |
|
Rating image, 4.0 out of 5 stars.
4.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor
Rating image, 4.0 out of 5 stars.
4.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Best For
Digital experience and down payment assistance |
|
Rating image, 4.0 out of 5 stars.
4.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor
Rating image, 4.0 out of 5 stars.
4.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Best For
Relationship discounts |
|
Rating image, 5.0 out of 5 stars.
5.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor
Rating image, 5.0 out of 5 stars.
5.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Best For
Diverse loan options |
|
2024 Award Winner
Rating image, 4.5 out of 5 stars.
4.5/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor
Rating image, 4.5 out of 5 stars.
4.5/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Best For
No mortgage insurance option |
|
2024 Award Winner
Rating image, 4.0 out of 5 stars.
4.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor
Rating image, 4.0 out of 5 stars.
4.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Best For
Diverse loan offerings |
|
Rating image, 4.5 out of 5 stars.
4.5/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor
Rating image, 4.5 out of 5 stars.
4.5/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Best For
Easy online application |
|
Rating image, 4.5 out of 5 stars.
4.5/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor
Rating image, 4.5 out of 5 stars.
4.5/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Best For
First-time buyers |
We've thoroughly researched dozens of mortgage lenders operating across the U.S. to give you a head start when it's time to choose one -- start with our reviews below.
Best for: No unnecessary fees and 100% online application
Bottom Line
Better has the right combination of features and perks, including no unnecessary fees, low mortgage rates, and a fast, 100% online application process. Better Mortgage does not charge lender fees such as those for origination, application, processing, and underwriting. As a result, Better states that home buyers save $8,200 and customers who refinance save $8,200 over the life of their loans.In addition, Better states that applicants can get a personalized rate and a pre-approval in minutes. This can help buyers cut their costs while saving time. The lender also offers $150 off closing costs when applying through The Ascent site.
Min. Credit Score 580 FHA 620 Conventional and VA 700 Jumbo
Min. Down Payment
Key Features
Loan Types
Fixed Rate Terms
Adjustable Rate Terms
Why is Better one of our best mortgage lenders? Better offers attractive refinancing rates and a wide range of loan types. Its online application and automated underwriting help make the loan process quick and easy. What's more, Better doesn't charge any unnecessary fees, leaving more money in your pocket for other expenses.
Fees and Closing Costs:
Best for: VA loans
Bottom Line
The fact that it is one of the largest VA home lenders speaks volumes. Veterans United specializes in VA loans for military members, and offers 24/7 customer service over the phone as well as free credit counseling service. But Veterans United also offers an array of terms and loan products, in addition to competitive rates.
Min. Credit Score
Min. Down Payment
Key Features
Loan Types
Fixed Rate Terms
Adjustable Rate Terms
Why is Veterans United one of our best mortgage lenders? Veterans United specializes in VA loans, including refinance loans and jumbo loans. Veterans United is an experienced VA lender that can help simplify the loan process for eligible borrowers.
Perks include its online loan process, 24/7 customer service, and highly rated credit counseling service. Credit counseling is free, and has helped thousands of people raise their credit score and become homeowners.
Fees and Closing Costs:
Best for: Top customer service and streamlined online app
Rocket Mortgage®
Bottom Line
Rocket Mortgage led the transition to a full digital experience and online-only applications. Its seamless process is one reason Rocket Mortgage is consistently ranked in the top two on J.D. Power's customer service rankings. Rocket Mortgage has a robust and high-quality app that makes it easy to use.
Min. Credit Score 580 FHA 620 other mortgage products 680 Jumbo
Min. Down Payment 0%-3.5% (FHA & VA loans) 3% (conventional loans)
Key Features
Loan Types
Fixed Rate Terms
Adjustable Rate Terms
Why is Rocket Mortgage® one of our best mortgage lenders? Rocket Mortgage® consistently achieves high rankings in customer service surveys, and being a happy customer is something we all want. Its online application and highly rated app make it a solid choice for borrowers who prefer the ease of a digital loan process over doing business in person.
Rocket Mortgage® offers low or no down payment mortgages for borrowers who qualify for an FHA or VA loan.
Fees and Closing Costs:
Best for: Diverse loan products and cash back rewards
Axos Bank Mortgage
Bottom Line
No lender fees for qualified existing customers, along with a fully online experience make it a top pick. One of the rare lenders to offer jumbo loans up to $30 million. Axos also offers a mortgage with rewards, giving up to 3% cash back every year.
Min. Credit Score 580 FHA loans 620 other mortgage products
Min. Down Payment
Key Features
Loan Types
Fixed Rate Terms
Adjustable Rate Terms
Why is Axos Bank Mortgage one of our best mortgage lenders? We love Axos Bank's cash back program. Axos Bank checking account customers who maintain a minimum average daily balance can participate in its cash back program, which provides mortgage borrowers an annualized 3% cash back credit on mortgage payments (up to $100/month).
Axos Bank Mortgage offers a comprehensive array of mortgage products, including jumbo mortgages, interest-only mortgages, and nonconforming loans.
Fees and Closing Costs:
Best for: Diverse loan types and terms
New American Funding
Bottom Line
New American Funding is one of the largest privately owned direct mortgage lenders in the country. The lender offers competitive rates and a wide variety of loans and customizable loan terms. The lender also has a highly efficient lending process that allows for quicker closing times. What's more, New American can be a good solution for people building credit and wanting a good mortgage. It focuses on lending to underserved communities.
Min. Credit Score 580 FHA 620 other mortgage products
Min. Down Payment 0% VA 3% Conventional 3.5% FHA
Key Features
Loan Types
Fixed Rate Terms
Adjustable Rate Terms
Why is New American Funding one of our best mortgage lenders? We love New American Funding's commitment to help borrowers in underserved communities become homeowners. New American Funding provides educational resources for first-time home buyers, and offers loan products for borrowers with less-than-perfect credit.
New American Funding is willing to work with self-employed borrowers and can help them find non-QM mortgage options.
Fees and Closing Costs:
Best for: Digital experience and down payment assistance
Guaranteed Rate Mortgage
Bottom Line
Guaranteed Rate does a great job with ease of usability, offering comprehensive loan information during your research phase, plus the option to securely upload and digitally sign loan documents when you're ready to apply. The lender publishes its rates for different loans online, making it easy to compare options.
Min. Credit Score
Min. Down Payment
Key Features
Loan Types
Fixed Rate Terms
Adjustable Rate Terms
Why is Guaranteed Rate Mortgage one of our best mortgage lenders? Guaranteed Rate Mortgage makes it easy for borrowers to navigate the mortgage process online. Its website has an intuitive interface -- you can easily find information about loan types, terms, and rates with just a few clicks.
Guaranteed Rate Mortgage's rates page includes a feature that enables you to compare the cost of a loan with zero, one, or two discount points.
Fees and Closing Costs:
Best for: Relationship discounts
SoFi® Mortgage
Bottom Line
SoFi® has a complete digital mortgage and refinance application process. It offers membership discounts and a modern experience. It's a potential fit for self-employed borrowers, based on SoFi®'s nontraditional underwriting process that focuses on a combination of credit history, income, and assets.
Min. Credit Score
600
Min. Down Payment 0% VA loan 3% first-time borrowers 3.5% FHA loan 5% everyone else
Key Features
Loan Types
Fixed Rate Terms
Adjustable Rate Terms
Why is SoFi® Mortgage one of our best mortgage lenders? SoFi® Mortgage offers membership perks you won't find with many other mortgage lenders, including a member discount for borrowers who have a loan or investment account with SoFi, and access to financial and estate planning services. Its fully online application process is a plus for borrowers who don't need in-person assistance.
Fees and Closing Costs:
Best for: Diverse loan options
Bank of America Mortgage
Bottom Line
Bank of America is one of the largest banks in the U.S., offering a wide variety of financial products in addition to its mortgages. Few lenders can match the lineup of loan products and terms. Bank of America offers a Preferred Rewards program for borrowers who have bank accounts at the bank and investment accounts at Merrill. Borrowers can qualify for an origination fee or interest rate reduction based on their eligible tier at the time of application.
Min. Credit Score
Min. Down Payment 0% VA loans 3.5% FHA 3% Conventional loans, Affordable Loan Solution® mortgage, Freddie Mac Home Possible® mortgage 5% Other loans
Key Features
Loan Types
Fixed Rate Terms
Adjustable Rate Terms
Why is Bank of America Mortgage one of our best mortgage lenders? Bank of America Mortgage provides loan options for borrowers of all income levels. Eligible borrowers with low to moderate income can benefit from Bank of America Mortgage's Affordable Loan Solution® program, which has a minimum 3% down requirement.
Bank of America customers with considerable assets may qualify for closing cost and HELOC interest rate discounts.
Fees and Closing Costs:
Why is Navy Federal Credit Union Mortgage one of our best mortgage lenders? NFCU offers surprisingly low mortgage interest rates and displays its mortgage rates on its website. Its Homebuyers Choice Loan has no down payment or PMI requirements, and is available to first-time home buyers. Other benefits include its free rate lock, rate match guarantee, and loans tailored for military members.
Fees and Closing Costs:
Best for: Diverse loan offerings
PNC Mortgage
Bottom Line
PNC is a large bank with a wide range of financial products. It offers an online tool called Home Insight Planner to help borrowers find a home that fits their budget and needs. It then matches a borrower to its diverse loan products and terms. PNC can accommodate many borrowers, including those looking for mortgage options with no PMI.
Min. Credit Score
Min. Down Payment 0% VA and USDA 3% conventional 3.5% FHA
Key Features
Loan Types
Fixed Rate Terms
Adjustable Rate Terms
Why is PNC Mortgage one of our best mortgage lenders? PNC Mortgage offers many options for borrowers who need down payment assistance or borrowers with low to moderate income. Its low down payment mortgage with no PMI requirements is particularly attractive.
PNC Mortgage also provides several educational resources, including interactive calculators, PNC's Home Insight Planner (helps you find the right type of loan), and PNC's application Tracker (takes you through the loan process from start to finish).
Fees and Closing Costs:
Best for: Easy online application
Pennymac
Bottom Line
Pennymac specializes in government mortgages like VA and FHA loans. Pennymac offers rate transparency, help via phone or online, flexible loan terms, and a rate guaranteed to beat competitors. Pennymac is a great place for people to start looking for a mortgage.
Min. Credit Score 580 FHA and VA loans 620 Conventional loan 700 Jumbo loan
Min. Down Payment
Key Features
Loan Types
Fixed Rate Terms
Adjustable Rate Terms
Why is Pennymac one of our best mortgage lenders? We like how easy it is to find Pennymac's current mortgage rates (and that it shows rates and mortgage discount points for several loan terms). Pennymac also offers several calculators to help you estimate how much house you can afford, how much paying points will reduce your total costs, and how much you should save up for a down payment.
Additionally, Pennymac's website contains a wealth of educational resources, and its customer service department is available every day of the week.
Fees and Closing Costs:
Best for: First-time buyers
Flagstar Bank Mortgage
Bottom Line
Flagstar Bank offers a wide variety of mortgage options to match your individual needs. It offers personally tailored mortgage options, specialty loans, renovation and new home construction loans, professional loans, and many other personalized financing solutions.
Min. Credit Score
Min. Down Payment 0%-3.5% (FHA and VA loans) 3% (conventional)
Key Features
Loan Types
Fixed Rate Terms
Adjustable Rate Terms
Why is Flagstar Bank Mortgage one of our best mortgage lenders? Flagstar Bank Mortgage offers several specialty loans, including multiple-property loans, construction loans, and renovation loans. It also provides down payment assistance programs and loans with lower PMI rates.
First-time home buyers can find comprehensive information about the mortgage process on its website and use its mortgage calculators to help determine how much they can borrow, and estimate their closing costs and monthly payment amounts.
Fees and Closing Costs:
Follow these six steps to find the best mortgage lender for you.
A higher credit score could help you save money over the long term with a lower interest rate on your mortgage. Check your credit score before you apply. You may be able to check it for free by logging onto your bank or credit card dashboard. Otherwise, find a free credit score website.
If your score isn't where you want it to be (and especially if it's close to the cutoff for a lender's lower rate), take steps to improve it. The two most important things you can do for your score are pay your bills on time and keep credit card debt low.
Before selecting a mortgage lender, have a sense for how much you can borrow. A good affordability benchmark for your total housing payment is 28% of your monthly gross (before taxes) income. Your housing payment includes the principal and interest, your homeowners insurance, property taxes, and your homeowners association fees, if any.
If the dollar amount seems too high for your budget, you can aim for a smaller loan and smaller payment. Even if you're approved for a bigger loan, you don't have to commit to a payment that would make your financial life hard.
Now that you have the monthly payment amount in mind, use a mortgage calculator for your state to figure out how much you could borrow. The amount you can borrow will depend on mortgage interest rates and how much you pay for property taxes, insurance, and HOA fees, so you'll want to play around with the numbers a little.
Your mortgage rate will depend on your credit score, your down payment, the loan type, and the lender. Even a small difference in rates can have a big impact on how much you end up paying every month and overall.
When lenders quote rates, be sure to ask how many mortgage discount points you would have to pay to get the quoted rate.
Virtually all mortgage lenders offer 15-year mortgages and 30-year mortgages, but not everybody wants those terms. You could get a lower interest rate by choosing a different term, or reach some other goal. For instance, maybe you plan to retire in 23 years and you want your loan to be paid off by then. Explore the different term options with all of the lenders you talk to.
Closing costs are charges for things like the property appraisal, prorated property taxes, a credit report fee, a title search fee, and so on. These could total 2% to 6% of your total loan amount.
Getting prequalified can give you a general estimate of the mortgage rate you might qualify for, without hurting your credit score. A hard credit check for pre-approval could knock a few points off your credit score, but should give you a more accurate rate estimate.
A mortgage lender is a bank, credit union, online lender, or other financial institution that provides a loan to purchase real estate.
Yes! Examples of mortgage types include:
Once you've found a few mortgage lenders you love, it's time to compare them. There are a few factors that are important to compare to make sure you find a home loan that fits your situation.
When you're ready to apply for a loan, it's a good idea to apply with multiple lenders on the same day. After you apply, they are each supposed to give you a document called a loan estimate. The loan estimate is a standard form, so they'll all look the same even if they are from different lenders.
This tells you all the information about the loan you're being offered, including closing costs. If you apply with multiple lenders, you can compare the loan estimates and see how the closing costs stack up against each other.
Many factors go into qualifying for a mortgage. In general, lenders like to see a good credit score, a down payment, and consistent income. They also prefer that all your monthly debt payments -- housing included -- add up to less than half of your monthly income.
If you don't check all those boxes, don't worry. Look at different mortgage types and talk to lenders -- many are flexible to different situations.
Brian Adams
Associate Dean of Graduate Programs, Pamplin School of Business at the University of Portland
How can home buyers feel more confident when choosing a mortgage lender?
As with any large-ticket item purchase, the more information you have to make a decision the more confident you are with your choice. Due to the size of the mortgage industry in the U.S. there are many lending platforms and mortgage information sites on the internet. I searched for "mortgage rates" and ended up with 674 million results. For comparison purposes, searching for "NFL" brought up 496 million results. Granted, this could result in decision paralysis with this much information. I would recommend starting with your current bank/credit union, and include other lenders from [review] sites. It is likely the lender you choose will end up selling your loan through the mortgage-backed securitization process. So focus on lower rates and fees. Customer service is less under your control.
How do changing interest rates affect mortgages in different communities?
The loan decision is standardized in the mortgage market due to the participation of Fannie Mae and Freddie Mac (two government-sponsored enterprises that buy and sell about half of U.S. mortgages). FICO® Score, current income, and availability of money for a down payment are the most important factors. The efficiency of the mortgage market works against underserved communities where the ability to build a prime FICO® Score (above 720) can be more difficult. If you do not have the opportunity to build a credit history then it is more difficult to obtain an affordable mortgage. Therefore, the issue for underserved communities is the opportunity to create a solid credit history.
What's one tip you would give to members of underserved communities looking to get the best mortgage rate possible?
Building a credit history is the key. This starts with on-time payment of bills (utilities, cable, cellphone) and then moves on to other opportunities like credit cards. Utilizing a credit card as a debit card, for only small-ticket purchases that can be paid off in full every month, also helps build credit. There are also programs through the U.S. Department of Housing and Urban Development's FHA program targeted directly at helping underserved communities become homeowners.
Clifford Rossi
Executive-in-Residence and Professor of the Practice at the Robert H. Smith School of Business at the University of Maryland
How can homebuyers feel more confident when choosing a mortgage lender?
First, ever since the financial crisis in 2008, a number of measures were taken to strengthen and improve oversight of mortgage lending practices in the industry. The Consumer Financial Protection Bureau (CFPB) was established in part to address many of the deficient and sometimes predatory lending practices that occurred at that time. As a result, mortgage lenders, even those nonbank mortgage entities that are not regulated as closely as commercial banks and other depositories at the federal level must comply with all applicable federal state and local laws regarding mortgage lending. Generally, in shopping around for a lender you can trust, I would look at their track record in terms of complaints which are available at the CFPB Consumer Complaint Database. References from friends and family are another good way of benchmarking lenders in terms of how they handled the loan process. Regulated depositories, according to my research, tend to have far less operational problems in loan origination than nonbank financial institutions in terms of how they follow the process required to underwrite borrowers for Fannie Mae or Freddie Mac-eligible loans. So that might be another factor to consider as well.
How do changing interest rates affect mortgages in different communities?
We are approaching the end of a very long secular decline in interest rates that has spanned decades. At some point we expect the Fed to begin the process of taking measures that will start to raise interest rates including US Treasuries. Since the 10-year US Treasury yield is the benchmark for setting 30-year fixed-rate mortgage rates, we should expect that higher rates are going to dampen demand for mortgages at some point. Lower income borrowers, including minority borrowers, are going to feel the impact first of higher interest rates which will further put the dream of homeownership out of reach during a period of time when there are acute housing affordability issues already.
What's one tip you would give to members of underserved communities looking to get the best mortgage rate possible?
I'll offer a few tips. The first is one that every borrower needs to do first. Check your credit score and credit history through one of the readily available credit reporting companies and services and find out if there are any issues that you can address prior to applying for a mortgage. The second tip is look at your current finances. Add up all your outstanding monthly debt including credit card, student debt and the like and divide that by your monthly income. The lower that debt-to-income ratio is, the better chance you have at getting a loan. Also, determine how much money you have to put down on a home. Make sure you leave yourself with enough cash or short-term assets that you can tap for an unexpected event and for home maintenance. If you are a first-time homebuyer, do some homework or take a class on what to expect in owning a home. These activities can really help put you in good shape to find the right home and mortgage for your family.
Chester S. Spatt
Professor of finance at Carnegie Mellon University's Tepper School of Business
How can home buyers feel more confident when choosing a mortgage lender?
It is important for home buyers to undertake sufficient search to obtain quotes from various prospective lenders before selecting one -- especially given the range of pricing that can arise. They also should try potentially to clarify the servicing process with the lender (or even check with other borrowers of the lender about their experience, if feasible).
How do changing interest rates affect mortgages in different communities?
The decline in interest rates has contributed to high house prices and loan values, as buyers would bid more aggressively.
What's one tip you would give to members of underserved communities looking to get the best mortgage rate possible?
I would reinforce my advice (above) -- it is very important for home buyers to undertake ample search so as to ensure that they are receiving favorable pricing on their loans as underserved communities are especially vulnerable to attempts to exercise market power. This may be at the heart of the meaning of a community being "underserved."
Michael Manahan
Lecturer at California State University Dominguez Hills, Author and Consultant
How can home buyers feel more confident when choosing a mortgage lender?
The first thing to understand about home lenders is that many of the companies that advertise mortgage loans are not really lenders. They are brokers. The money is not coming from them -- it is coming from a lender (to whom the broker takes the loan). As an example, I financed my last mortgage through Right Choice Mortgage. However, the loan was made to me from Glendale Credit Union.
The second thing to understand is that even if you go directly to a lender, the lender may still act as a broker. A lender, such as Bank of America, could give you a mortgage. But they could just as easily "sell off" the mortgage to a group of investors in the mortgage aftermarket. Why? Because this frees up the bank's capital to make more loans.
Who you choose to help you obtain a mortgage really depends on two things: 1) Your personal financial situation and, 2) What sort of relationship you want with a mortgage lender. If you have a complex personal financial situation, such as having multiple sources of income, being self-employed, having investment properties, and owning LLCs, or previous bankruptcies, you may find that some mortgage companies don't want to bother working with you (because it will take more time and effort to get your mortgaged approved). Also, many of the large automated or semi-automated mortgage companies where you apply online don't have the right "boxes" on their application for you to explain everything. You can end up in a quagmire of endless frustration working with these companies.
Even if you have a straightforward financial situation, you still must decide what sort of relationship you want with the mortgage company. Are you okay doing everything online or do you need to fill out forms by hand? Do you want to speak to the same person every time or are you okay with talking to whichever one of the hundreds of people in the call center answers the phone? Do you need someone who can walk you through the process and explain things to you, or are you an old "mortgage pro" who understands how the system works? Making the right decision will make your mortgage application process a whole lot easier.
Whoever you choose to work with to get a mortgage, before getting in too deep, find out how they do business and if their style fits in with your needs. Finally, if you do use one of those online brokers, if you can't find the phone number on the home page, don't use them.
How do changing interest rates affect mortgages in different communities?
Interest rate changes affect home buying. When interest rates drop, homes become more affordable because loan payments go down. As an example, if you purchased a home for $600,000 (the average price of a home in California) and put 20% down, you would have a $480,000 mortgage. At 3% interest your payment before taxes and insurance would be $2,024. At a 5% interest rate, your payment would be $2,577, or 27% higher. As lenders typically look for your cost of housing to be no more than 30% of your income, lower interest rates should allow more people to get mortgages, and higher interest rates will restrict mortgages.
However, changes in mortgage interest rates do not affect all communities the same. Obviously very rich people, who may still mortgage their homes for tax or financial planning purposes, have few restraints on their ability to get a mortgage. At the lower end of the scale, the least expensive house may continue to sell well when interest rates rise because there are many programs to help underserved and first-time buyers. FHA loans are specifically intended for lower-income, lower-credit, and/or first-time home buyers. This program, which is backed by the Federal Housing Administration, makes it easier to become a homeowner by relaxing the standards borrowers must meet to get a mortgage.
The communities that get hit hardest (or benefit the most) when interest rates change are those communities where the home prices are above average, but not high enough to be of interest to rich people. As an example, in California, that might include communities where the home prices are in the $1 million to $1.5 million range. I recall the recession of 2008, when the value of real estate dropped substantially, there was still demand for the least expensive houses and still demand for mega-mansions of the rich. But those million-dollar homes couldn't find many buyers.
What's one tip you would give to members of underserved communities looking to get the best mortgage rate possible?
I offer three tips to members of underserved communities to get the best rates possible. First, do whatever you can to improve your credit score. Even in underserved communities credit scores are one of the primary indicators of credit worthiness used by our financial system.
Second, work with a bank or lender that is familiar with all the programs that are available to underserved communities. Some mortgage companies may not want to use these programs because they may be extra work. Find a mortgage company who can talk frankly to you about those programs that are available and that you can use to your benefit.
Finally, make sure the mortgage company knows that you are a member of an underserved community. Today when we do a lot of business online or on the phone, it may be difficult for the lender to know that you are member of an underserved community which under the broad-based definition recently provided by the White House is said to include "people of color and others who have been historically underserved, marginalized, and adversely affected by persistent poverty and inequality." That definition covers a lot of people.
Scott Deacle
Associate Professor of Business and Economics and Department Chair at Ursinus College
How can home buyers feel more confident when choosing a mortgage lender?
The most effective way is to get quotes from multiple lenders. Time consuming as it is, the extra work pays off with leverage in your discussions with those lenders. If you know what other lenders are offering, each lender is likely to try to match or beat the rates you are getting with other lenders.
Another way is to obtain a mortgage from the bank or credit union where you have your checking or savings accounts. Such lenders sometimes offer discounts to their account holders.
You can also compare the rates lenders are offering to national benchmark rates, such as those published by Freddie Mac.
How do changing interest rates affect mortgages in different communities?
I think changing interest rates have similar impacts across communities. When interest rates fall, they generally fall for all borrowers.
What's one tip you would give to members of underserved communities looking to get the best mortgage rate possible?
Many issues surrounding loans to members of underserved communities stem from issues with credit scores and credit reports. My one tip is to obtain the free credit report to which you are entitled by law and review it for inaccuracies before applying for a mortgage. If there are errors in your credit report, correcting them will improve your credit score, which in turn could get you a lower interest rate.
Most mortgage lenders set the minimum credit score for a mortgage at around 620. But some loans, including a VA loan, have no minimum credit score requirements at all. Other government-backed loans, such as FHA loans, are available to applicants with lower scores.
Keep in mind that if your application is strong in other areas, it's easier for the lender to be flexible with your credit score. For instance, it'll help if you have a bigger down payment.
To find the best mortgage rates from the best mortgage lenders, get quotes from as many lenders as possible. Look for lenders that allow you to check rates with only a soft credit check. Soft credit checks don't affect your credit score. Compare rates and fees to assess total costs of borrowing.
If you want the best loan at the most competitive rate, the following can help:
Mortgages are secured loans. A secured loan is guaranteed by collateral (something the lender can take if you fail to repay the loan). On a mortgage, the real estate is the collateral. Collateral lowers the risk for the lender, and in turn the lender can charge less for the loan.
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