How To Choose The Right Mortgage Lender

Are These Mortgage Lenders Trustworthy

The Better Business Bureau grades companies based on responses to customer complaints, honesty in advertising, and transparency about business practices. Here are the BBB grades for our top mortgage lenders:

Most of our top picks have an A+ from the BBB. The exceptions are Guild Mortgage, Chase, and Navy Federal. Guild Mortgage and Chase have an A- rating from the BBB due to government actions taken against the businesses. Navy Federal has an NR because it is responding to customer complaints that had previously closed.

Several of these lenders do have recent public controversies, though, even the ones with great BBB grades.

In 2019, the US Justice Department required Rocket Mortgage’s parent company Quicken Loans to pay $32.5 million for alleged mortgage fraud. The Justice Department claimed Quicken Loans approved mortgage applications it shouldn’t have. Although Quicken Loans paid the settlement, the company never admitted to mortgage fraud.

A Navy Federal employee has claimed the lender pressured mortgage underwriters to approve loans even if they didn’t have sufficient reason to believe applicants could repay the loans. Then she filed a lawsuit and said Navy Federal retaliated against her whistleblowing by changing her job duties. She dropped the case in late 2020.

In 2020, Guild Mortgagepaid the United States $24.9 million when it was accused of approving FHA mortgages for people who didn’t qualify, resulting in loan defaults.

Whats The Down Payment Needed To Buy A House

You might assume that you need a 20% down payment to buy a house. However, in some cases, you can buy a home with as little as 3% down. Certain types of government-backed loans even allow you to get a mortgage with 0% down.

The often-quoted 20% figure has to do with avoiding private mortgage insurance , which protects your lender in the instance that you default on your loan. You can cancel your PMI on a conventional loan as soon as you build 20% equity in your home, and your lender will automatically cancel PMI as soon as you reach 22% equity in your home.

Check with your lender to find out about how much of a down payment you need to have at closing. Ask about government-backed loans and whether you qualify for a 0% down loan. Finally, ask about PMI requirements and when you can cancel PMI if youre required to have it.

You Walk Away With More Questions Than Answers

As a first-time homebuyer, there is going to be a lot you learn as you go through the process. If your lender isnât taking the time to explain each step, or theyâre rushing through your conversations as quickly as possible, or even worse: telling you not to worry, you donât need to understand whatâs happening â they arenât to be trusted.

A people-first lender wants you to feel educated, comfortable, and confident â not uncertain and doubtful.

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Know The Difference Between Interest Rate And Apr

One major distinction you should know before you begin comparing lenders is the difference between interest rates and APR.

An interest rate is simply the price you pay for borrowing money, expressed as a percentage of the principal amount you’re borrowing. As a basic example, if you’re borrowing $1,000 for one year, a 4% interest rate implies that you’ll pay $40 in interest to the lender.

On the other hand, annual percentage rate, or APR, is the total cost of borrowing money. In addition to the interest, or finance charge, APR also includes certain fees you’ll pay to borrow the money, such as a mortgage origination fee charged by the lender.

The point is that APRs and interest rates are often slightly different, and APR is the number you should consider when comparing lenders’ offers. You may be surprised how different the APR can be between two loans with the exact same interest rate.

Our Pick For Best Mortgage Lender Of 2022

Mortgage rates are at their highest level in years and expected to keep rising. It is more important than ever to check your rates with multiple lenders to secure the best rate possible while minimizing fees. Even a small difference in your rate could shave hundreds off your monthly payment.

That is where Better Mortgage comes in.

You can get pre-approved in as little as 3 minutes, with no hard credit check, and lock your rate at any time. Another plus? They dont charge origination or lender fees .

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New American Funding: Nmls#6606

Min. credit score

Min. down payment

New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.

View details

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Why we like it

Good for: borrowers who need to be evaluated on the basis of nontraditional credit and those interested in various down payment assistance programs.

Pros

• Uses manual underwriting to evaluate creditworthiness, in some cases.

• Offers full online mortgage application, rate quotes, document upload and loan tracking.

Cons

Min. credit score

NASB offers conventional loans for as little as 3% down.

View details

NASB couples competitive mortgage rates and reasonable fees with a good assortment of loan options.

Pros

• Offers competitive rates and origination fees.

• Considers nontraditional income sources, in some cases.

Cons

• Does not offer home improvement mortgages.

• Doesn’t offer home equity loans and lines of credit.

Min. credit score

Better offers 3% down payments on conventional loans.

View details

Good for: tech-savvy borrowers who prefer an online experience.

Pros

• An online process with human help as needed.

• Makes it easy to see customized mortgage rates.

• Offers an “underwriter reviewed” preapproval letter in as little as 24 hours.

• Appraisal guarantee promises the loan wont change even if appraisal is lower than expected.

Cons

Min. credit score

View details

Pros

Cons

Min. credit score

Which Types Of Mortgage Lenders Have The Lowest Rates

Generally speaking, banks and credit unions often offer the lowest rates however, shopping around for mortgage lenders will give you an opportunity to compare rates to find the best one for you. You may want to also look for a lender that offers an express closing program, which can get you in a home in a few weeks.

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Can You Afford The Home

Having proven yourself to be a reliable borrower is all well and good, but mortgage lenders will still require evidence that you can actually afford the home. Unfortunately, simply being able to afford monthly mortgage payments is not enough.

Mortgage lenders will require the following:

A Minimum Deposit

When purchasing a home, you will need to put down a deposit. Mortgage lenders will not give first-time buyers 100% of the home’s value. This is a major reason many renters struggle to become homeowners, even if they pay the equivalent of a mortgage in rent every month. If you have savings available, you need to determine how much you are willing or able to let go of as a deposit on your new home.

Some lenders demand higher deposits than others. Look for home loans that only require as much as you have available for a downpayment. Some lenders will allow a downpayment of as low as 3%.

Monthly Income

Understandably, lenders will check your monthly income, which is a major factor in determining whether you can afford the loan. Of course, you will have done the math beforehand as well, and if you could not include mortgage payments in your budget, you wouldn’t be trying to buy the home.

This may be an issue if your business has only recently started bringing in enough money for you to afford a mortgage. Even if you have good reason to be confident in your ability to maintain this income level, proving that to the lender is more difficult.

Finding The Right Lender

Banks and are the two entities that most often come to mind when homeowners think about obtaining financing, but these are not the only potential sources of a loan. Consumer finance companies, savings and loan institutions, and other specialized lending firms also offer mortgages. Taking the time to choose the right lender can make a big difference in the amount of money you will spend in fees to obtain a loan as well as in mortgage interest over the lifetime of the loan.

Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development .

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Get $5000 Towards Your Closing Costs With Simpleshowing

Before you buy, get connected with a SimpleShowing Agent who can give you an additional $5,000 on average towards your closing costs. SimpleShowing Agents can connect you with a preferred lender and help offset the upfront expenses of buying a home with our closing cost credit $5,000 on average.

Contact us today to connect with an agent to help you find your new home.

Can I Purchase A Home Alone Without My Spouse

Though its not as simple as applying for a loan and leaving your partner off the paperwork, it is possible to purchase a home without your spouse. If your state has a community property law, you and your spouse must split ownership of any assets you acquire while you are married.

If you reside in a common-law state, you are permitted to omit your partners financial information from your home purchase documents. Even in states where common-law relationships are legal, certain government loans mandate that your lender take your partners debt and income into account when you apply for a loan.

If you live in a community property state or a common-law state, ask your lender if it is possible to purchase a home without your spouse. Additionally, find out about quitclaim deeds, which let you add your spouses name to the deed at a later time if you so desire.

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Pay Your Bills On Time

If you dont already have a long history of on-time payments, you need to begin establishing that history immediately. Do what you have to do to make sure your payments are not even a day late. Pay online, set up automatic payments, and pay any bills as soon as you get them. Lenders have much stricter policies about late payments, and not only will a history of late payments affect your credit score, you will be considered high risk, even if youve never missed a payment entirely.

Fairway Independent Mortgage Corporation

The bottom line:Fairway Independent Mortgage is a good lender for people who want to explore their options. It provides many types of home loans and has several term lengths to choose from.

Fairway Independent offers a digital closing option, giving borrowers the ability to have a quick, remote closing experience. You may also be able to use non-traditional credit when applying with this lender.

Fairway Independent has an A+ rating from the BBB and ranked above average in J.D. Power’s annual study.

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How To Choose The Right Mortgage Lender

By Manuel Yllesca January 27, 2022

A mortgage is probably the biggest loan you will ever take out, seeing as you are using it to pay off an asset worth hundreds of thousands of dollars. In all likelihood, you will be paying your mortgage for fifteen to thirty years, with interest vastly inflating the amount you end up paying over this time. As such, you should take particular care when choosing a mortgage lender.

However, most potential homeowners don’t know what to look for when choosing a mortgage lender. Different lenders will try selling you on different factors, and some of these may be important to you, while others are irrelevant when trying to find the best mortgage rates.

Over the past year or so, with the pandemic causing the Federal Reserve to lower rates, there has never been a better time to take out a mortgage. Rates hit record lows in January 2021, leading to an uptick in home buyers and consequently sky-rocketing house prices. But with recent inflation hitting record highs, experts expect interest rates to be raised as well, and mortgage rates are already inching upwards. Therefore, if you want to take advantage of low rates, it is best not to wait too long.

Most mortgage lenders will provide similar rates, with industry standards keeping them in line with each other. But that does not mean all mortgage lenders are created equal or are right for you. To help you get started on your journey, here are some tips for choosing the right mortgage lender in 2022.

Watch Out For Mortgage Fees

Sometimes, the mortgage with the lowest interest rate will have hefty set-up fees attached. So its vital to work out the total cost of the deal over the period you expect to have it if youre planning to remortgage every two years to a new fixed rate deal, the fees can really add up.

When you select a mortgage, do the maths and make sure its still a good deal after you include the fees. The shows the total cost of the mortgage over the full term , but if you want a 2 or 5 year mortgage thats the period over which you need to compare the cost to find the right mortgage.

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Ask Your Bank Or Local Credit Union

Check with your current banking provider. Big banks like Bank of America, Wells Fargo, and Chase also offer mortgages. Beware, if you donât love the customer service and technology you are already getting, their mortgage process isnât going to be any better. Itâs usually best to go with a company that focuses exclusively on mortgages.

Decide What Type Of Mortgage You Want

The style and structure of the loan itself has a big impact on the lifetime costs and interest ramifications of a mortgage. Understanding what type of mortgage you need will help you choose a lender because each lender offers different products and services.

Different terms

Mortgages come with a variety of terms, or payment schedules. Common mortgage terms are 15 years and 30 years. But you can also find 10-, 20-, or even 40-year mortgage terms.

The terms of your mortgage affect the monthly payments and the total amount of interest youll pay. Shorter terms lead to bigger monthly payments, but youll pay less interest to the lender over time and be free of a mortgage sooner. Longer terms come with smaller payments, but the amount of interest you pay over the life of the loan is higher because youll have the loan for more time.

Fixed rate

Fixed-rate mortgages are the go-to choice for the typical homebuyer. The interest rate locks in and will never increase over the life of the loan. This provides you with long-term certainty because the main variables to your monthly payment would be property taxes and homeowners insurance.

Adjustable rate

An adjustable-rate mortgage has a teaser interest rate for a set period of time and a variable rate afterward. Ideally, the teaser rate is lower than what youd find on a comparable fixed-rate loan, though this effect has been diminished lately with low rates across the board.

Government-backed

Conventional

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Where Can You Get A Mortgage

There are many companies that can help you get a mortgage loan. You could consider a local bank branch where you have a savings account, an online lender or a mortgage broker that works with many lenders.

Lenders that accept your application and lead you through the mortgage process up until closing are loan originators. Once you close on a mortgage, the loan might be sold from the loan originator to another company, which will then be in charge of collecting payments from you.

How Can Someone Decide Between A Conventional Mortgage Vs A Government

Anthony Park, author:

‘It really depends on if you qualify. If you do qualify for FHA or VA mortgages, those are no-brainers. just because the terms are so favorable. If you don’t qualify, you fall back by default onto conventional mortgages.”

“The most common government loan that’s widely available to almost everyone is the FHA loan. There’s a couple of reasons why somebody would go with FHA instead of conventional one. Their credit is a little on the crummy side, let’s say below 700. You can get conventional with down to a 620 score, but the mortgage insurance gets really expensive. FHA doesn’t discriminate no matter how perfect or crappy your credit is, the mortgage insurance is the same.”

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Tips For Finding The Best Mortgage Lenders

Before house hunting, shop around for the best mortgage lenders. Get tips on finding the right lender for you, and see our top picks for a variety of needs.

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list ofour partnersandhere’s how we make money.

When you buy a home, youre in it for the long haul. Youll have a mortgage payment for 15, 20 or 30 years, so its smart to shop around to find the best mortgage lenders out there.

How to look for a lenderMortgage lenders vary by the types of home loans they offer and the rates and fees they charge. The best lender for one person might not be the best for someone else.

Before shopping for lenders, get your finances in order and learn about the different types of mortgages. Then compare lenders that offer the products and services you need.

Here are five tips to help you find the best mortgage lender.