For the Buyer

How to Choose a Mortgage Lender

By Amanda Webb on September, 27 2022

How to Choose a Mortgage Lender

You’ve finally found the perfect home, and you’re ready to start the process of securing a mortgage loan. But before you commit to a lender, it’s important to do your research and make sure you’re getting the best deal possible.

Interest rates are important, of course, but they’re not the only factor to consider. It’s also important to compare the fees and the level of customer service offered by different lenders.

When choosing a mortgage lender, it’s important to consider all of your options. By following these tips, you’ll be on your way to finding the best mortgage for your needs and buying your new home!

Where Can You Get a Mortgage

Deciding whether or not to buy a home is a big decision. That’s why it’s important to do your research and be sure that you’re ready for the financial responsibility of owning a home.

Once you’ve made the decision to buy, you’ll need to start thinking about where to find a mortgage.

Mortgages are available from a number of sources. Deciding where to get a mortgage can be overwhelming, but knowing what’s available will help you narrow down your options.

Conventional Banks

A conventional bank is just that—a traditional bank that offers banking products like savings accounts and checking accounts in addition to products like mortgages.

If you have a long-standing relationship with a particular bank, getting a mortgage through them can be advantageous. They may offer you more favorable terms than another lender because they know and trust you.

However, if you’re not already a customer of the bank, it may be more difficult to get approved for a loan.

Another thing to consider is that conventional banks typically have rigid guidelines when it comes to issuing loans by requiring a higher minimum credit score or lower debt-to-income ratio.

If your financial situation doesn’t meet their criteria, you likely won’t be approved for a loan.

Credit Unions

A credit union is similar to a traditional bank, but they’re usually smaller and community-based. Credit unions typically offer members lower fees and higher interest rates on deposits than commercial banks.

When it comes to mortgages, credit unions typically have more flexible lending criteria than banks. This means that if you have less-than-perfect credit, you may still be able to qualify for a loan from a credit union.

One downside of working with a credit union is that they typically have fewer branches than banks—which can make it difficult to access your money if you don’t live near a branch location.

Mortgage Lenders

Mortgage lenders are companies or individuals who lend money directly to borrowers for the purpose of financing a home purchase.

Mortgage lenders can either be retail or wholesale lenders. Retail lenders work directly with borrowers, while wholesale lenders work with mortgage brokers (more on that below).

If you choose to work with a mortgage lender, one advantage is that they may be able to approve your loan faster than other types of lenders since they aren’t waiting on approval from an investor or another institution.

Mortgage Broker 

A mortgage broker is a middleman between the borrower and the lender. Their job is to find the best mortgage rate for their client. In order to do this, they work with multiple lenders to compare the rates and monthly payments for you.

Some brokers are paid by the borrower, while others are paid by the lender. 

There are both pros and cons to using a mortgage broker.

On the plus side, they have access to multiple lenders and can do the legwork of shopping around for the best rate on your behalf. They also may be able to get you a lower rate than you could get on your own because they have relationships with lenders and know how to negotiate.

On the downside, you may have to pay fees for their services, and there’s always the possibility that they’re not looking out for your best interests since they’re being paid by the lender. 

Mortgage Marketplaces 

A mortgage marketplace is an online platform that allows borrowers to compare rates from multiple lenders. The advantage of using a marketplace is that you can see all of your options in one place and easily compare rates.

The downside is that you may not get as low of a rate as you would if you used a broker since lenders know you’re shopping around and will only offer their best rates. 

How to Find the Best Mortgage Lender

Securing a mortgage is a huge financial commitment, so you want to make sure you find the best mortgage lender before you start the process. Here are a few things to keep in mind as you shop around for a mortgage lender.

Get Your Finances in Good Shape

The first step in finding the best mortgage lenders is to get your finances in good shape. This means reducing your debt-to-income ratio by paying down debts and saving up as much money as possible. Having a strong financial foundation will give you negotiating power when it comes time to apply for a mortgage.

Learn What Kind of Mortgage is Right for You

There are many different types of loans available, so you’ll want to learn about the different mortgage options before you start shopping around.

VA Loans

VA loans are available through the Department of Veterans Affairs and are designed to help military members achieve their homeownership goals. The key benefits of a VA loan include no down payment, low-interest rates, and flexible repayment terms.

In addition, VA loans are available for both purchase and refinance transactions.

As a result, VA loans can be a great option for active and veteran military members who are looking to buy or refinance a home.

USDA Loans

The USDA Loan Program is a government-sponsored mortgage program that enables eligible homebuyers to purchase a primary residence in a rural area with little or no money down.

In order to be eligible for a USDA loan, homebuyers must meet certain income and credit requirements. In addition, the property must be located in an eligible rural area.

The USDA Loan Program offers a number of benefits to eligible homebuyers, including low-interest rates and down payment assistance.

FHA Loans

FHA loans are a type of mortgage that is insured by the Federal Housing Administration (FHA). These loans have lower minimum credit score requirements than other types of mortgages, and they also require as little as 3.5% down.

As a result, FHA loans can be an attractive option for borrowers who might not otherwise qualify for a home loan.

However, borrowers need to be aware of the mortgage insurance that comes with an FHA loan. Mortgage insurance is required on all FHA loans, regardless of the size of the down payment, and will add to the cost of the loan. 

Conventional Loans

Conventional loans are a popular option, especially for borrowers with good credit. These loans typically require a 20% down payment, but some lenders will allow as little as 3% down for qualified borrowers.

Without a 20% down payment, the borrower will be required to pay mortgage insurance until the home has 20% equity. Mortgage insurance protects the lender in case of default, but it can add to the monthly payment and potentially increase the total cost of the loan.

Jumbo Loans

Jumbo loans are a type of mortgage that is used to finance properties that are too expensive for most conventional loans. In order to qualify for a jumbo loan, borrowers must have excellent credit and a high income.

Jumbo loans typically have higher interest rates than conventional loans, and they also require a larger down payment. However, jumbo loans can be an excellent option for borrowers who are looking to purchase a high-end property.

Jumbo loans can also be used to finance investment properties, such as rental homes.

Compare Rates from Multiple Mortgage Lenders

Once you know what kind of mortgage you’re looking for, it’s time to start shopping around. Compare rates from multiple lenders to find the best deal. Be sure to compare not only interest rates but also origination fees, points, and other costs associated with the loan process.

Get Pre-approved

Getting pre-approved for a mortgage is a good way to show sellers that you’re serious about buying a home. It can also give you an estimate of how much home you can afford and help you get better terms on your loan. To get pre-approved, most lenders will require that you have a good credit score and provide documentation of your income and assets.

Here’s everything you’ll need to submit to get pre-approved:

  • Social Security numbers for yourself and any co-borrowers.
  • Savings, checking, and investment account information.
  • Information about outstanding debt obligations, including credit cards, car loans, student loans, and other balances.
  • Two years of tax returns, W-2s and 1099s.
  • Salary and employer information.
  • Information about how large a down payment you can make and where the money is coming from.

Compare Loan Estimates and Choose the Best

After you’ve been pre-approved for a loan, most lenders will provide you with a loan estimate that outlines the costs associated with the loan. Use this document to compare offers from multiple lenders and choose the best deal. Remember to compare not only interest rates but also origination fees, points, and other costs associated with the loan.

When choosing a lender, it’s also important to consider customer service and how easy it is to communicate with representatives. You want to make sure you’ll be able to easily reach someone if there are any problems with your loan. Research different lenders online or ask friends and family for recommendations.

Key Questions to Ask a Mortgage Lender

It’s important to remember that a mortgage is a big financial commitment, so you should take your time and choose the lender that’s right for you. To help you make the best decision, here are four key questions to ask any potential mortgage lender.

How long do you expect the process to take?

The timeline for getting a mortgage can vary depending on factors like credit score, employment history, down payment amount, and more. However, most lenders will give you a general idea of how long they expect the process to take once they have all of your information.

Who will be my point of contact throughout the process?

A good mortgage lender will assign a dedicated loan officer to handle your application and be your main point of contact throughout the entire process. This person will be available to answer any questions or concerns you may have along the way.

Which steps will take place online and which will occur in person (such as appraisal and closing)?

Many lenders are now offering the option to apply for and track your loan completely online. However, there are still some steps that will need to be done in person, such as ordering an appraisal and attending the closing. Be sure to ask your lender about which steps can be done online and which will require an in-person visit.

How long of an interest rate lock do you recommend?

An interest rate lock is what it sounds like—it locks in your interest rate for a set period of time, typically 30-60 days. This ensures that even if rates go up during that time frame, you’ll still get the lower rate that was quoted to you initially. Ask your lender how long they recommend locking in your rate and what their policy is for extending the lock if necessary.

How to Compare Mortgage Loan Offers

When comparing mortgage loan offers, there are several key factors you should consider: interest rate, fees, down payment, and mortgage insurance. By taking the time to compare these factors across different lenders, you can be sure that you’re getting the best possible deal on your mortgage loan.

Interest Rate

The interest rate is the cost of borrowing money from the lender. It’s important to compare rates from different lenders so that you can get the best deal possible. You can use a mortgage calculator to estimate your monthly payments based on the interest rate.


Some lenders charge origination fees, which are generally 1% of the loan amount. Other common fees include appraisal fees and title insurance. Be sure to ask about all of the fees that will be charged so that you can compare them across different lenders.

Down Payment and Mortgage Insurance

Lenders typically require a down payment of at least 3% of the purchase price of the home. Some lenders also require private mortgage insurance (PMI) if the down payment is less than 20%. PMI protects the lender in case you default on your loan. The cost of PMI varies, but it is usually 0.5% to 1% of the loan amount annually.

Get Connected with the Best Mortgage Lenders

When you’re ready to take the next step in securing a mortgage for your home, know that Radius is here to help. We have extensive experience working with borrowers of all kinds, and our team of experts can guide you through every step of the process. Contact us today to get started.

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- September 27, 2022

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