How To Find The Best Mortgage Lender

Choosing a mortgage lender is not easy. With a plethora of options available, it's hard to know which mortgage lender is the best fit for your financial background, needs, and goals. Finding a mortgage lender is often overwhelming being that it is a huge financial decision.

Therefore, choosing the right mortgage lender for you is crucial. Many people struggle to find a mortgage lender since they don't understand the mortgage process, so they don't know how to choose a mortgage lender or find a mortgage lender that is best for their needs.

However, choosing the right mortgage lender is of the utmost importance. Finding a mortgage lender that is the best fit for your unique needs requires extensive research, planning, and preparation, but it's all worth it. The perfect mortgage lender will understand your financial health and offer the best loan options.

Understanding The Different Types of Mortgage Lenders

Mortgage lenders are not one-size-fits-all. There are several different types of mortgage lenders, each with their own focus area and specialty. Understanding the different types of mortgage lenders and what they do, can help you choose the right mortgage lender for you.

Listed below are some of the different types of mortgage lenders:

• Mortgage Bankers – A mortgage banker is a company, individual, or institution that originates loans. Mortgage bankers package and prepare loans for underwriters. A mortgage banker is licensed to close mortgages in their own name. A mortgage broker carries out similar tasks to a mortgage banker; however, a mortgage broker does lending on behalf of a financial institution.
• Direct Lenders – Direct lenders refer to banks, credit unions, and other companies that provide mortgages directly to their consumers. With a direct lender, most of the mortgage process is done in-house.
• Portfolio Lenders – Portfolio lenders originate and fund loans from clients' bank deposits. This means that they can hold onto the loans and not resell them after mortgage closing. Some examples of portfolio lenders include credit unions, community banks, and savings/loan institutions. While conventional loans are resold onto the secondary market, this does not happen with portfolio lenders.
• Wholesale Lenders – A wholesale lender does not interact with borrowers. Instead, they work directly with mortgage brokers and other relevant third parties to offer discounted rates for loans and loan products. Wholesale lenders rely on mortgage brokers to help borrowers navigate their mortgage loan applications and guide them through the approval process.
• Correspondent Lenders – Correspondent lenders are the quickest and most efficient option for working with a mortgage lender. A correspondent lender originates and funds their own loans, then quickly sells them to larger financial and lending institutions. Correspondent lenders will sell these loans on the secondary market after the loan has closed.
• Hard-Money Lenders – Hard-money lenders are a unique type of mortgage lender. A hard-money lender is a private investor, which can be an individual or group, that provides short-term loans that are secured by real estate. While conventional lenders assess a borrower's financial ability to repay a loan, a hard-money lender focuses on the property value to evaluate the investment. Additionally, they usually require repayment within 1-5 years.

Tips For Finding The Best Mortgage Lender

Finding the best mortgage lender can be daunting. A mortgage lender plays a crucial role in the loan process, which explains why finding a mortgage lender that is a good fit for you is paramount. Below are some tips and tricks for finding the best lender:

• Make Sure Your Credit Score Is At Its Best – A good credit score is a key to finding a great mortgage lender. Mortgage lenders want to work with borrowers that are most likely to pay them back promptly, and a good credit score is a major indication of this. A low credit score indicates that you are a risky candidate for a loan, resulting in a higher interest rate. Consequently, you should do everything you can to get your credit score in the best shape possible. Not to worry, improving your credit score is not as difficult as you might think. There are several small actions you can take to improve your credit score.
• Decide Which Mortgage Type You Will Need – Researching different mortgages helps ensure that you find the right mortgage lender. Here are some of the types of mortgages:
  • Fixed-Rate: A fixed-rate mortgage is the most popular choice for homebuyers. With a fixed-rate mortgage, you have a locked-in interest rate. The only variables to your monthly payment are property value and home insurance.
  • Adjustable-Rate: An adjustable-rate has a low rate initially and variable rate later. The initial rate is usually lower than most fixed-rate options; however, you won't have certainty or stability.
  • Government-Backed: A government-backed mortgage is secured by the government, which requires a lower credit score and down payment. You must meet eligibility standards to qualify for this type of loan.
  • Conventional: A conventional loan refers to a loan that is not backed by a government agency. You can choose from conforming or non-conforming conventional loan options.
• Compare Rates From Several Lenders – Comparing rates from multiple mortgage lenders is the best way to ensure that you go with the best option for your specific circumstances. Many companies have free quote tools or provide free estimates online, making it easy for you to compare lenders.
  When you have several quotes, you can evaluate and assess to find the best mortgage lender for your needs. You should never commit to your first option; instead, you should do extensive research and compare choices.
  Additionally, you can even use these quotes and estimates as a resource in negotiations with prospective mortgage lenders and brokers.
• Get Preapproved For A Loan – Getting preapproved for a loan can save you valuable time. By getting a mortgage preapproval before you even begin shopping for homes, you can stand out against other homebuyers. A preapproval letter shows you are serious about purchasing a home and you have your finances in order, to pay for the property. All you need to do to get preapproved is submit financial information and documents including the following:
  • Social Security number (or numbers for co-borrowers)
  • Bank account information (checking, savings, and/or investment)
  • Outstanding balance obligations (student loans, credit card debt, car loans, etc.)
  • Tax returns (W-2s & 1099s – at least 2 years)
  • Employer & salary information
  • Down payment information (how much you can pay and where the money is coming from)
• Ask Questions & Read The Fine Print – A mortgage includes tons of fine print. It is essential that you read the fine print to fully understand what you are agreeing to and ask any questions that you might have. If something seems off or confusing, just ask questions.

Additionally, don't be afraid to ask extensive questions to get to know the mortgage lender's specific process, expectations, and more. For example, you can ask a prospective mortgage lender what the best method of communication is, how quickly they respond to inquiries, what the turnaround time is for closing, what the down payment requirements are, and more.