If you're considering buying a home, you need to know how to choose a mortgage lender.
Your mortgage is likely the largest debt you'll take on. It's important to shop around among the best mortgage lenders to secure the most affordable home loan possible. By doing so, you can lower your monthly mortgage payment -- and save thousands over the life of your loan.
This guide to how to choose a mortgage lender will make the process easy. Simply follow these four steps to secure the right home loan for you.
Not all mortgage loans are created equal. Some are insured by the government, others meet the requirements to be sold to government-sponsored entities, and others don't fall into either of these two categories.
There are differences in qualifying requirements and loan terms for different kinds of mortgages. It's important to understand these when you're comparing mortgages. For example:
Most major lenders offer both conforming and non-conforming loans. However, you may have more limited options if you want a loan insured by Uncle Sam.
In determining how to choose a mortgage lender, it's important to know what mortgage rates are reasonable.
There are many different resources where you can find national average rates. The Federal Housing Financing Agency also shows interest rates over the course of the past several months so you can compare current rates to historical trends.
If you know the prevailing rates, you can immediately disqualify any mortgage option that's above market rates.
Remember, though, that if your credit score is low, you may not qualify for favorable -- or even average -- interest rates. Try to improve your credit score as much as possible before applying for a mortgage.
The next step in figuring out how to choose a mortgage lender is to begin comparing loan offers from different kinds of lenders. To get a good range, include at least one local lender, credit union, and online lender in your consideration.
You can use online tools to find mortgage lenders and review mortgage rate offers. Make sure you're comparing apples-to-apples when evaluating each loan estimate. Look at:
Find the loan that's going to provide the best overall deal for you. If you want minimal risk, a fixed-rate loan is a solid option -- if the upfront fees and interest charges aren't too high.
Look for a lender that treats customers fairly. Key things to focus on when deciding how to choose a mortgage lender include:
There's a very good chance your mortgage loan will get sold to a different loan servicer after closing. In this case, the lender's reputation isn't as important as some of the other considerations when you're determining how to choose a mortgage lender.
Still, you'll want to make sure the lender has a good reputation for getting deals done fairly from the start. That way, you'll be treated right as you go through the mortgage process -- even if your mortgage loan ultimately ends up in the hands of a different loan servicer.
You'll be paying off your mortgage for decades. By the time you own your home, you will have paid thousands of dollars in interest to your mortgage lender. Take the time to learn how to choose a mortgage lender and follow the steps above. That way, you'll ensure you find the best loan. And with the best loan, you can enjoy your home without worrying about how to pay the mortgage bills.
If you want to uncover more about the best mortgage lenders for low rates and fees, our experts have created a shortlist of the top mortgage companies. Some of our experts have even used these lenders themselves to cut their costs.
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