Buyer Guides

How to choose the best mortgage lender

Finding the right mortgage lender for you requires a bit of research

Choosing the best mortgage lenders is always a big deal for home buyers. Odds are, your mortgage lender will be helping you make the biggest purchase of your life—and they’ll be a part of your life for years, sometimes decades, to come.

Here’s how to choose the best mortgage lender for you:

  1. 1. Learn about mortgage options

    Decide if you want a hands-on or online lender.

    When you’re ready to get a mortgage, you’ve got a lot of options. Local banks, national banks, credit unions, and mortgage companies are among the most common. Any of them could be the best mortgage lender for you, based on your needs. If you want a very hands-on experience where you can walk into a person’s office and ask questions, a local bank or credit union might be a good fit. If you want a hands-off, online-only experience, some online mortgage lenders offer that. It’s a good idea to look closely at a few vendors in each category to see which one offers terms and services that fit well with your life. You can use Trulia’s pre-qualification tool to connect with local lenders near you.

    Research mortgage types.

    There are many types of mortgages, and you want to make sure the mortgage lender you choose offers the kind that’s best for you. Here are a few different types of mortgages:

    • Fixed-rate mortgages: The interest rate for this type of mortgage is locked in at the beginning and stays the same for the life of the loan. That means your mortgage payment will be predictable and steady.
    • Adjustable-rate mortgages: After an initial period (often 3, 5, 7, or 10 years) of a low interest rate, the rate will change with the market. This makes your payment unpredictable for the remainder of the loan, but this mortgage type can be a good option if you plan to sell before the initial period ends.
    • Conventional loan: This is a traditional loan. They can be fixed-rate or adjustable rate, and terms are based on your financial history, credit score, and down payment.
    • Government-backed loans: FHA, USDA, and VA loans are different programs backed by the government. They are typically fixed-rate loans and often require lower down payments and lower credit scores. Each has specific qualifiers though, like being a veteran, buying in a rural area, or meeting income requirements.
    • Jumbo: This is a loan that exceeds the amount set by Federal Housing Finance Agency. These typically finance luxury homes or homes in highly competitive markets, and they have different requirements than smaller loans, including a very high credit score and a large down payment.

    Read customer reviews and company info.

    Read online reviews and comb through the companies’ websites to learn more about them. Create a shortlist of mortgage lenders that offer the types of mortgages you’re interested in, have positive reviews, and offer the type of customer service experience you’re hoping to have.

  2. 2. Get help from people in the know.

    Ask your friends, family and your agent for recommendations.

    There’s more to a mortgage lender than the terms they offer, and no one knows more about what working with a particular lender is like than their customers. Ask your friends and family for their recommendations (for and against) mortgage lenders. Not only will you have some names to look into, but you’ll also get a glimpse into what they value in a mortgage lender—great communication, refinancing options, etc.

    If you’ve found a good real estate agent, they’ll have some recommendations for you as well. They work with clients every day who are working with different mortgage lenders, so they generally have a feel for which ones have made home buyers happiest.

    Decide if a mortgage broker is a good fit for you.

    Want help sorting through all of your options? A mortgage broker is a pro who helps you find the best mortgage lenders for your situation. Of course, the trade-off is that they charge a fee. Though many mortgage brokers can access mortgage products that offer enough savings to offset that fee, there’s no guarantee it’ll work out that way. Depending on how much time you can dedicate to researching mortgage lenders and comparison shopping, having a mortgage broker do it for you might be a good option.

  3. 3. Connect with lenders for pre-approval

    Get pre-approval and compare numbers.

    Getting mortgage pre-approval sounds (and can feel) pretty official, but it’s actually part of the comparison shopping process. (Just to clarify: pre-approval is different from pre-qualification, which you may have done earlier on. Pre-qualification gives you a ballpark figure of how much home you can afford.) Narrow your options down to your top three and apply for pre-approval to all three of them. Careful comparison shopping is important because an interest rate difference of even a fraction of a percentage point can save you thousands of dollars over the lifetime of your loan.

    That said, applying with three lenders generally lets you know how much you can afford under as many different terms as you’ll qualify for.

    Your pre-approval letters have two functions. One big one is that you’ll be able to start house hunting with confidence and you can make an offer on a house with the backing of a mortgage lender. The other is that you get to see all the details a lender is willing to offer you. Use these details, called mortgage terms, to decide which offer is best for you.

    Understand APR versus interest rate.

    Two mortgage terms that are easy to confuse when comparing mortgage terms is APR, or annual percentage rate, and the interest rate. You might assume comparing the interest rates across different loans is a fair comparison, but it’s not. A mortgage with a low interest rate can have additional fees rolled in that make it more expensive in the end than a mortgage with a higher interest rate. The APR controls for all that. Compare the APRs from one to another, and you’ll be making an accurate comparison.

    Now, it’s up to you! If you want to learn more about your mortgage lender’s pre-approval offer, don’t hesitate to ask. Here are smart questions to ask a mortgage lender before you commit.

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