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How to Choose a Mortgage Lender

Purchasing a home, whether it’s your first or you’re moving to one better suited to your current needs, is an exciting time! Many buyers enjoy the house-hunting process and finding the right home for their needs and budget. A part of the process you might not have as much experience in, though, is finding the right lender for your mortgage.

There are plenty of different types of financial companies to choose from that offer home loans. Beyond selecting the mortgage company you’ll use, you also have to figure out the best loan program for your personal financial situation. Possibly even more important is that your lender is supportive in helping you navigate the process. You’ll want a loan officer who is attentive to your needs and can help guide you through this new and sometimes confusing undertaking.

We will walk through the process of choosing the best lender for you below, from reviewing your starting point, to understanding the different types of lenders, to searching for the best rate.

Review Your Credit Score and History Before Applying

The first step you should take before formally starting your lender search is gaining an understanding of your starting point. By reviewing your credit history and score, you can check for any inconsistencies or errors and get them fixed before completing applications with lenders.

Besides making sure your credit record is in the best shape possible, you’ll also want to review your debt-to-income ratio, or DTI. This ratio comes from adding up all of your monthly bills and dividing them by your income. If your DTI is too high, it can represent a risk to your lender because it shows them you may not be able to afford to pay back your loan.

Once you’ve got a handle on your credit and DTI ratio, you’ll then want to consider what type of lender you should work with.

UNDERSTAND THE DIFFERENT TYPES OF LENDERS

A large part of picking the right mortgage lender for your next home purchase will involve understanding the various types of companies that can offer you lending options.

CONVENTIONAL BANKS

Many consumers have a checking and savings account at a bank, and lots of conventional banks offer home loans in addition to their deposit accounts. Some buyers prefer the convenience of working with the institution that already takes care of their day-to-day financial transactions, but the mortgage process can seem impersonal at conventional banking organizations. They might not have as many mortgage options or offer the flexibility that will support your specific needs as well.

CREDIT UNIONS

Similar to banks, credit unions typically offer mortgages to their members. Compared to larger banks, you’re likely to receive more personalized service from a smaller, more local credit union.

NON-BANK MORTGAGE LENDERS

These companies specialize in mortgage lending and don’t offer deposit accounts. Because they often provide only mortgages, they can usually offer quicker turnaround times, along with a higher level of personalization and expertise about the process. They will usually have a larger variety of loan programs and are where you can find the expertise you might need for a new construction, renovation, or other niche lending solution.

MORTGAGE BROKERS

Brokers act as intermediaries between buyers and potential lenders. They search for loan options on your behalf and will work with you to find the best choice. While this can take some of the stress out of the process on your end, it usually results in additional costs to cover the broker’s commission or fees.

Each of these types of lenders offer unique advantages. If you’re not sure of which type is best for your purchase, or if you don’t have a strong preference after understanding the differences between them, you can apply to any combination and review the loan estimates they provide you, letting the financial factor act as your guide.

COMPARE YOUR TOP CHOICES

As you’re shopping for the best loan program for your financial situation, you may – and probably should – apply at multiple lenders. This is the best way to compare options from different lenders head to head.

You can also use those interactions to get a feel for whether or not the lender would be a good fit from a customer service perspective. After all, this is a huge life and financial decision, and you want to have both an expert and an ally with a strong sense of customer focus guiding you through it.

These questions can help you evaluate a thorough comparison between lenders:

  • What are their fees?
  • Do they have loan programs to support my financial situation?
  • How has their customer service been so far?
  • Do they show a willingness to find the best solution for me?
  • Are they demonstrating the necessary expertise to support me through my mortgage journey?
  • Do they have technology solutions to make the process easy and seamless?
  • Are they transparent and do they keep me updated about the process?

Look at Referrals and Reviews

Once you’ve got a feel for which lenders could be a good fit based on their loan programs and the interest rate they’re offering, it’s a good idea to see what other clients are saying about them. Do they have a lot of positive reviews online, or are there a fair number of negative experiences? Do any of your family, friends, or colleagues have recommendations?

This is an important step to remember because, while a lender may quote you a fantastic rate or monthly payment estimate, customer service is going to be very important to your mortgage journey too. There’s a lot of work that both you and your loan officer have to do together to get you into your new home, and you want to work with someone friendly and supportive.

ASK QUESTIONS AND CHECK ALL THE FINE PRINT

Finally, you can narrow down your selection by asking any lingering questions you might have and double-checking the details of the loan estimate you were provided. If there’s anything you don’t understand, or if there’s something that doesn’t seem quite right to you, be sure to ask the loan officer you’re working with about it.

Being thorough in this last step will give you the confidence to move forward with the right lender and loan officer, who will ultimately make your goal of getting the keys to your dream home a reality.

Choosing the right lender for your next mortgage can seem like a daunting task, but it’s very important. Your lender will play a large role in determining how your home buying process plays out. Talk with our team of trusted, friendly, and knowledgeable loan officers to learn about the options we can provide to support you in this journey.