Choosing a mortgage lender is one of the first steps that you'll take toward becoming a homeowner. However, there are so many lenders out there that you may have trouble zeroing in on your best option. To that end, I've created a guide on how to find the best lender for you. Read it over so that you can start your home search process with confidence.
Do your research
If you're not sure where to start looking for a lender, the good news is that this process is very similar to hiring any other professional. The first step is often to reach out to your network to see if anyone has a recommendation. Friends, family, or even your real estate agent may have someone in mind who can help.
That said, be sure to do your own research as well. For each recommendation that you're given, take the time to check them out online and to read any reviews that you can find. This should give you enough information to form a short list of top contenders.
Interview each option
Once you've put together a list of potential mortgage lenders, the next step is to call each one and interview them about the services they offer. While this doesn't have to be a particularly formal process, you'll want to be sure to spend enough time talking to each one that you're able to get your questions answered and get a sense of what working with them may be like.
As far as what you should ask, here are a few questions to get you started:
- What loan programs do they offer?
- What credit score is required to get a loan?
- What size down payment is required?
- Are they currently offering any buyer assistance programs?
- What are the fees associated with working with this lender?
- How long can they lock in an interest rate and is there a fee to do so?
- Do they service any of their loans in-house?
That said, don't be afraid to ask any additional questions you may have and to pay close attention to how well your inquiries are received and explained. After you've had a chance to talk to everyone, work on narrowing down your list even further.
Shop around for your pre-approval
The next step in this process is getting pre-approved for a mortgage. Though you can apply for a pre-approval with as many lenders as you like—provided that you submit all your applications within the same 15- to 30-day period—conventional wisdom says that you should shop around for a loan by applying with at least your top three contenders.
Getting pre-approved by a handful of lenders will give you a better sense of your options. Put simply, different lenders have different qualifying standards and fee structures. They may approve you for different loan amounts, give you different interest rates, or impose different charges.
While you're applying with your top lenders, make an effort to give the same information to each one. That way, once you have all of your pre-approvals in hand, you can feel confident that you'll be able to make an apples-to-apples comparison between them all.
Ask about the fine print
However, even with the pre-approvals in front of you, you won't be able to choose the lender that's right for you until you ask about the fine print. You'll want to make sure you get answers to the following questions:
- What conditions need to be met in order for you to be given a mortgage?
- What will my monthly payment be at my maximum purchase price?
- What can I expect to pay in closing costs?
- Can you give me breakdowns for a few different pricing scenarios?
- Do I qualify for any special assistance programs?
- When can I lock in my rate?
- Do you have any personal recommendations for me based on my finances?
Once you have all your questions answered, take some time to think about which lender made you feel most satisfied. Ultimately, choosing a lender is all about working with whomever you feel the most comfortable.