Finding the right lender is one of the most important steps in the home-buying process, but with 88,131 active mortgage originators in the second quarter of 2023, it can feel overwhelming to know where to get a mortgage.
The lender you choose doesn’t just impact your chances of approval – it can significantly affect the long-term cost of your mortgage. Interest rates vary widely between lenders, and even a small difference adds up over time. For example, on a $1 million loan, a 0.1% lower rate could save you $1,000 in just one year.
In this guide, we’ll share 10 practical tips to help you navigate your options and choose a lender that fits your needs and financial goals.
The Importance of Choosing the Right Mortgage Lender
Choosing the right mortgage lender is one of the most important financial decisions you’ll make during the home-buying process. After all, most home loans come with terms that last 15 to 30 years, making it a long-term commitment. The lender you pick will directly affect some key loan terms, including the interest rate, closing costs, and even how much you need for a down payment. These details may seem small at first, but they can have a huge impact on both your upfront expenses and the overall cost of your mortgage.
For instance, a lower interest rate could save you tens of thousands of dollars over the life of the loan. Beyond that, a lender with lower fees or flexible down payment options could help you reduce closing costs, making homeownership more affordable. Choosing wisely can also mean working with a lender who’s willing to guide you through the process, answer questions, and customize a loan that’s a perfect fit for you.
Simply put, the right lender isn’t just about rates – it’s ultimately about finding a partner who aligns with your needs, both in the short term and over the decades you’ll spend repaying your loan. Taking the time to research, compare, and choose carefully is an investment in your financial future.
Tips for Choosing the Best Lender
Tip 1: Understand Your Financial Needs
Before starting your mortgage search, take a step back to assess your financial situation and goals. Are you buying your first home, upgrading to a larger property, or purchasing a rental for investment purposes? Maybe you’re refinancing to lower your payments or unlock your home equity. Your reasons will determine the type of loan that’s right for you.
Consider factors like your budget, credit score, and how much you can realistically afford for a down payment. On top of that, think about whether a specific loan type, like a fixed-rate, adjustable-rate, or even a jumbo loan, makes sense for your long-term financial plans. Taking the time to understand what you need can save you time and help you find the best lender and loan for your situation.
Tip 2: Research Lender Options
Not all lenders are created equal, so before committing to one, you should consider exploring a variety of options. Depending on what you’re looking for, you may find better results with a bank, credit union, mortgage broker, private mortgage lender, or even an online lender. If you’re a real estate investor, entrepreneur, retiree, or contract worker, alternative lenders like private mortgage companies often offer more flexible solutions, especially on the non-QM (non-qualified mortgage) side. These lenders specialize in working with borrowers who don’t meet traditional requirements, such as steady income or tax returns.
Tip 3: Compare Interest Rates and Terms
Shopping around for competitive interest rates is one of the smartest moves you can make. Rates can vary daily and between lenders, so locking in a low rate can save you thousands of dollars over the life of the loan.
Be sure to evaluate loan terms too and know the differences between a fixed-rate loan, which offers stability, or an adjustable-rate mortgage (ARM), which could start with lower payments but can fluctuate over time. Keep in mind that fixed-rate loans are the most popular, with 92% of U.S. households with mortgages choosing them, while only 8% use ARMs. Comparing rates and terms across multiple lenders ultimately helps you make an informed decision to get the most bang for your buck.
Tip 4: Check for Fees and Closing Costs
Fees and closing costs can have a huge impact on the overall cost of your mortgage, so understanding them is essential. Common lender fees include application fees, origination fees, and other costs that typically range from 1-2% of the loan amount. For example, on a $500,000 loan, a 1% fee equals $5,000, which isn’t a negligible amount of money for the average person.
Look for lenders who are upfront about their fees and provide detailed estimates, so there are no surprises later. Some lenders also offer free consultations or no-obligation pre-approvals, which can help you explore your options without any upfront commitment. Taking the time to review fees can save you both stress and money throughout the process.
Tip 5: Review Lender Reputation
A lender’s reputation is a strong indicator of the experience you can expect. Start by checking online reviews and ratings on platforms like Google My Business and Trustpilot to see what other borrowers have to say. You can also ask for recommendations from people you trust like friends, family, or real estate professionals who have experience in the industry. Financial advisors and mortgage brokers usually have valuable insights on certain lenders as well. A lender with a strong reputation for transparency, reliability, and excellent customer service is more likely to provide a smooth and stress-free mortgage process.
Tip 6: Evaluate Customer Service
The mortgage process can be complex, so working with a lender with above and beyond customer service should be a priority. Look for lenders who are responsive to your questions and offer clear, helpful communication throughout the process. Personal guidance and advice can make the mortgage process much easier, especially if you’re a first-time homebuyer. Additionally, consider whether the lender has useful resources on their website, like mortgage calculators, educational blogs, or FAQ pages, to help you make informed decisions. A lender who puts their clients first will make your experience far less stressful and much more manageable.
Tip 7: Check What Loan Products Are Offered
Not all lenders offer the same range of loan products, so make sure they provide options that would be a good fit for you. Depending on your situation, specialized loans like non-QM loans, jumbo loans, VA loans, or FHA loans might be the perfect solution. Here are some common loan types to look for if you’re a non-traditional homebuyer:
- Bank statement loans
- P&L loans
- Asset depletion loans
- Construction loans
- Fix-and-flip loans
- DSCR loans
Tip 8: Understand Pre-Approval Requirements
Pre-approval is one of the first steps in the mortgage application process, as it shows sellers that you’re a serious buyer and helps you understand your budget. Different lenders have varying pre-approval requirements, so be prepared to provide relevant documents like bank statements, credit reports, and proof of income or assets. Some lenders simplify this process with digital tools and quick turnaround times, which can be a game-changer in a hot real estate market. Choosing a lender that makes pre-approval straightforward and efficient will give you an edge when it’s time to make an offer.
Tip 9: Look for Flexibility and Special Programs
If you have unique financial needs, flexibility is key. Some lenders offer special programs like down payment assistance, alternative income verification, or qualification based on rental income instead of traditional pay stubs. These options can be great tools for non-traditional borrowers, such as real estate investors, retirees, or those with fluctuating income. Look for a lender who’s willing to work with your situation and provide tailored solutions to help you qualify.
Tip 10: Ask Questions and Negotiate
Don’t hesitate to ask your lender questions about rates, terms, and fees. Knowledge is power, and understanding your options can help you make better decisions. Additionally, discuss opportunities to negotiate – whether it’s a lower interest rate or waiving certain fees.
According to Freddie Mac, homebuyers can save $600-$1,200 annually by applying with multiple lenders, so shopping around and advocating for yourself can have a big payoff. Taking the time to ask questions and negotiate ensures you’re getting the best deal possible.
Final Thoughts on Where to Get a Mortgage and Choosing a Mortgage Lender
Choosing the right lender is one of the most important steps in your journey to homeownership. If you started off reading this article wondering where to get a mortgage, these 10 tips can now help you find a lender who aligns with your financial needs, offers competitive terms, and provides the necessary support to make the process as smooth as possible. Whether you’re focused on finding the best interest rate, checking fees, or reading online reviews, taking the time to research and compare lenders will pay off in the long run.
If you’re ready to explore your loan options, book a call with Defy Mortgage today or give us a call at (615) 622-1032. Let’s help you achieve your homeownership goals with confidence!
