How to Choose a Mortgage Lender

Aside from choosing a home, one of your most significant home-buying considerations may be selecting your mortgage lender. The reason for this is that your home is probably the biggest purchase you’ll ever make, and the lender has the power to control everything, including your interest rate and the costs you’ll incur.

What you need to know about picking the best mortgage lender for you is provided here.

Types of Mortgage Lenders

Banks, credit unions, and traditional mortgage lenders are just a few of the different kinds of mortgage lenders. Each has its own specifications, conditions, and rates.


According to Brad Jones, chief marketing officer of Newrez and a certified loan originator, using a bank can be a good choice for borrowers who prefer to have all of their finances in one location. But he cautioned The Balance via email that the procedure could go more slowly.

Credit Unions

Jones claims that compared to banks, credit unions typically offer lower borrowing rates and costs. But Jones noted that they frequently have fewer borrowing options than other kinds of lenders. Additionally, in order to obtain a loan through a credit union, borrowers must be members of that organization.

Mortgage Lenders

Mortgage lenders typically offer more loan possibilities and are quicker than banks. According to Jones, “loan origination, underwriting, and servicing are often handled wholly in-house.” Additionally, he claimed that these lenders are more accommodating to customers with bad credit.

Mortgage Brokers

You can run into a mortgage broker when looking for a mortgage. Despite not being lenders themselves, they can be quite helpful in guiding you toward the ideal mortgage for you.

Mortgage brokers serve as a point of contact between borrowers and lenders and can help borrowers navigate the process of choosing the best lender, according to Jones. Additionally, a mortgage broker may be able to secure you a special rate from their lenders and can help you avoid a mortgage with onerous payment terms, according to Brady Bridges, owner of Reside Real Estate in Fort Worth, Texas.

Banks and credit unions typically have the greatest rates but have more stringent lending requirements, claims Melissa Cohn, regional vice president at William Raveis Mortgage in New York. In contrast, private lenders and non-bank mortgage lenders typically charge higher rates but are more aggressive with their financing. The objective, according to Cohn, is to select the lender who will provide the lowest rate for the longest period of time at the desired loan to value.

How to Choose a Mortgage Lender

Your needs and unique financial status should be taken into account when looking for the best mortgage lender. The length of time a buyer plans to reside in their new house, their anticipated future income, and their credit score should all be considered before applying for a mortgage, according to Cohn.

Use Loan-to-Value or Other Factors as Filters

According to the loan-to-value you want to borrow, Cohn advised shopping. “If you require 90% financing, then you must only compare institutions that provide 90%.” Compare lenders who will accept your credit score if it is less than 700, according to Cohn. But never attempt to compare apples to oranges—especially in this day and age—because it never succeeds.

Remember That You Are “Shopping”

Because you should take into account multiple mortgage lenders, we refer to the process as “shopping for a mortgage.” By email, Andrina Valdes, COO of San Antonio’s Cornerstone Home Lending, advised The Balance to request estimates from at least three different mortgage lenders.

Compare Fees 

Ask about any costs that you could be expected to pay. The loan application, appraisal, credit report, document preparation, inspection, notary services, processing, underwriting, and other services may all incur expenses, according to Valdes. Jones claims that loan origination fees are typically assessed upfront. Although costs differ, Jones advised applicants to anticipate them to be between 0.5 percent and 1 percent of the overall loan amount.

Check Reviews and Follow a Checklist of Questions

Valdes and Jones suggested reviewing online customer reviews and contacting a mortgage lender or broker with the following queries:

  • How long has your company been around?
  • Will a hard credit pull be performed?
  • Is your processing, underwriting, and funding did internally or externally?
  • Could you please explain your origination, closing, and other expenses to me?
  • What kinds of loans are offered?
  • Which loan scheme and why would you suggest it to me?
  • What is the loan amount?
  • How much do I have to put down?
  • Do prepayment penalties exist?
  • Beyond a competitive mortgage rate, what additional benefits or initiatives do you provide?

The Bottom Line

Your credit score, the amount you can afford to pay down, and the numerous fees involved are a few things to consider while looking for the best mortgage lender. The mortgage lender who can best meet your needs will be able to provide terms that are within your means.

Check Also:

What Is a Permanent Loan?

Frequently Asked Questions

How do you file a complaint against a mortgage lender?

Try to fix any problems you may be having with your mortgage lender first by contacting their customer service or complaints department. You can file a complaint with your state’s department of financial services, the Better Business Bureau, or the Consumer Financial Protection Bureau if that doesn’t lead to a settlement.

Who is the best mortgage lender for buyers with bad credit?

It is still feasible to obtain a mortgage even if you have a poor credit rating and a history of financial missteps, however, you might have to put down a larger deposit or pay higher interest rates. Even mortgage lenders with a focus on programs for borrowers with subpar credit exist.

Which types of mortgage lenders have the lowest rates?

The lowest rates are typically provided by banks and credit unions, but if you shop around for mortgage lenders, you may compare rates to discover the best one for you. Searching for a lender that offers a fast closing program could help you buy a house in a matter of weeks.

What should you not say to a mortgage lender while shopping?

Avoid mentioning anything false or deceptive while looking for a mortgage lender. Everything needs to be confirmed before a mortgage may be issued. If you omit any information on your financial situation along the road, you run the danger of slowing down the process.

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