Finding the right mortgage lender is crucial to getting the best home loan. When you buy a house, you are making a financial decision that will affect you for many years. You will probably have a mortgage payment for 15 to 30 years, so it is wise to shop around and find the best mortgage lender and program for your specific needs.
Connecting with the best mortgage lenders is the first step to secure the mortgage loan that best needs your needs with lowest possible mortgage rates. You should make sure that you are comfortable with the mortgage lender you will be working with. While several aspects of the mortgage process remain consistent across lenders, there are variations that can impact the fees and service you encounter, making it essential to consider these factors when exploring different options.
This article will describe how to choose the best mortgage lender for finding your dream home.
Get Your Finances In Order Before Applying for a Mortgage
The first step to choosing the best mortgage lender is getting your finances in shape. Your credit score is critical in determining the rate that you get for your loan. With a higher score, you will have a lower rate and more choices of home-equity loans and mortgage programs available to you.
Next, if you have credit that needs some work, work on raising your score by paying everything on time. Pay down your credit card balances, too; lowering your debt-to-income ratio is important for getting loan approval with favorable terms. Reducing debt also will help you save for a down payment.
Understand The Types Of Mortgages Available
The next step to finding the best mortgage lender for you is to understand the different kinds of loans out there. The most common are:
- Conventional loans for people with good credit, but some can be had for only 3% down.
- FHA loans are designed for those with less perfect credit with 3.5% down, but rates are competitive.
- VA loans can help people in the military or retired military to get a home loan, and the rates are below market. There is no down payment requirement.
- USDA loans: Made for people who buy outside of large cities. No down payment is required.
Home loans vary widely by length of term, usually 15 and 30 years, and interest rate. Most Americans choose a fixed-rate mortgage and the rate stays the same for the entire term. Sometimes people will get a refinance mortgage loan with an ARM to get a lower intimal interest rate to increase their cash flow. The rate is usually a bit higher than a variable rate, which has a fixed period but can reset to market rates later. Variable rates can usually be between one and seven years on first and second mortgages.
Some lenders offer most or all of the loans described above, so talk to your lender about your situation and they will recommend the best program for your needs.
Compare Mortgage Programs and Interest Rates
The next step is to find a program and rate that works for your type of loan, income, and credit profile. Remember that the quote you get at this point is only an estimate. Your lender will need to pull your credit and do a loan application to get a firm answer on the rate and term. After you have several quotes from various lenders, you can narrow them down to the best terms and rates. Be sure to look at APRs and not just interest rates; this means you see exactly what the loan costs you when all fees are considered.
Get a Mortgage Preapproval
You should get a loan preapproval with several lenders before shopping for a house. Having a preapproval letter is important because it shows all parties, including your agent, that you can buy a home. When you make a home offer, lenders will have all the information they need to close the deal.
Compare the Estimates and Choose
You should get a loan estimate from every mortgage lender you applied with. This document shows the rate, payment, fees, and approximate closing costs. All lenders must provide this disclosure to you before finalizing the loan. You should look at loan estimates from at least three mortgage lenders. Consider a HELOC or personal loan before tapping your equity. Read every one and be sure you understand the rate, term, payment, and fees. Ask questions about anything you do not understand.
More About Choosing The Best Mortgage Lender
As you look for different loans, which financial institutions should you consider? Here are the most popular:
Banks
Most banks offer mortgage loans, and if you have an account there, your bank can be a good place to start. You can apply online or in person. You may prefer applying in person if you have accounts at your bank and already know some of the people there who will process the loan.
Credit Unions
There are thousands of credit unions in the US, and most offer mortgage loans. You usually need to be a member of a credit union to apply for a loan. Some credit unions offer lower rates and fees, so this could be a good choice.
Mortgage Brokers
If you want to work with someone with several lenders at their disposal, a mortgage broker can be convenient. The broker will review offers from several lenders they partner with and give you the best deal for your situation. However, a loan through a broker can cost more because of the fee you pay to them at the closing.
Online Mortgage Lenders
Some online mortgage lenders offer options to review quotes from several lenders at once. This gives you the chance to see the many options without going to several websites.
Summary on Choosing the Best Mortgage Lenders
If you follow the advice in this article, you will find the best mortgage lender for your needs and situation. There is no one perfect mortgage lender or program for every buyer, so once you understand what you need based on your specific factors, you can find the best lender for you.
Locking a mortgage rate with right lender has become more convenient than ever. Mortgage rates are easily accessible online through lender and rate aggregation platforms, with many lenders actively advertising their rates to attract visitors to their websites.
Initiating your mortgage loan search at the banks or credit unions where you hold accounts is a sensible starting point, as they may provide special rates and fees for their customers. Additionally, searching online allows you to discover lenders and access websites that compile information, including ratings, about leading mortgage brokers and lenders.
