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How to choose the best mortgage lender when buying a home

By August 21, 2017February 22nd, 2021Judi's Blog

How to choose best mortgage lender- Judi_Wright_Team


Getting ready to shop for a new home? Choosing the right home is a big decision. And, choosing a mortgage lender is just as important. After all, for most home buyers, the purchase of a new home may be one of the biggest financial transactions of their lives.


With so much money on the line, doing your homework to find the best mortgage company for your unique needs is worth the effort. To help you with the process, here are a few things to consider as you start your search for the best mortgage lender.

Tips for choosing the right mortgage lender


1) Tap into your real estate agent’s expertise

One of your most valuable assets when looking for a mortgage lender for your new home is your real estate agent.


Starting the process with your real estate agent is smart for many reasons. Here are a few:

  • Insightful referrals
    Your agent has lots and lots of experience with mortgage lenders. They know the good ones and the bad ones. Based on their previous experiences with lenders, your real estate agent can provide valuable insight into lenders’ reputations, processes, and strengths.


  • Expertise in lending process
    An experienced real estate agent has deep knowledge and expertise in the mortgage lending process. And, they can help guide you through the lender selection process so you know exactly what to look for – and what to expect.


  • Negotiating power
    Your experienced Realtor has valuable negotiation expertise. So, they know what can and can’t be negotiated with your mortgage lender. When selecting a mortgage lender, your realtor can help you select a lender and negotiate terms that are best for your situation.


  • Understanding of your needs
    And speaking of your situation. Your realtor knows your unique situation. And, they can be incredibly helpful matching your specific needs with lenders who specialize in loans like yours. Every mortgage deal is different. So, matching your needs with the right lender can make a big difference in overall rate, the time it takes to close, and your overall experience through the process.


  • Local knowledge
    Your experienced real estate professional has expertise in your local area and understands the local landscape. They know how to get things done — and who to go to. They also have valuable insight into lenders’ reputations and specialty areas which could save you time and money.

Home Buyer Resources

If you’re new to buying, keep this buyer’s checklist by your side to help you through the process. “Top 10 things you can negotiate when buying a home” and “Three ways to avoid overpaying or a house” will also be helpful for you.

2) Understand your financial situation and mortgage needs

One size does not fit all for mortgage loans –every loan is different. And, there are lots of variables that go into finding the right lender for your specific needs. Before you start your mortgage lender hunt, consider the following to make sure you find the right mortgage company that’s just right for you.


  • What is your financial situation?
    Understanding your current financial situation helps prepare you to ask the right questions of your lender. For example, your credit score and debt-to-income ratio are big factors when determining qualification and interest rates.Lenders use these to determine the risk of nonpayment and how much mortgage you can afford. Higher credit scores can mean more bargaining power for you, and lower interest rates. If you don’t know where you currently stand on these, ask your realtor for help.


  • How much house can you afford?
    Once you know your credit score and debt-to-income ratio, it’s a good idea to get a rough idea of how much mortgage you can afford. Consider what monthly payments you are comfortable with – both now and in the future. Life changes such as growing families, paying for college, and starting a business can impact your cash flow.For help figuring out monthly payments based on mortgage amounts, you can use a mortgage calculator like this one to give you estimates.


  • Which type of loan is best for you?
    There are many types of loans available today for all sorts of buyers. Having a good idea of the loan type that will work best for you gives you a head start when choosing the right mortgage lender because you can look for those that offer the loan types for your needs.Do you need a VA loan or FHA? Are you a first-time buyer? Do you have credit challenges that could impact your qualification? Navigating through this discovery can be complicated but lean on your real estate professional for expertise and insight.


  • Which loan terms should you consider?
    Once again, there is a slew of mortgage terms available. Should you consider a fixed rate FRM or an adjustable rate mortgage ARM? Should you stick to a 30-year mortgage, or would you be better off with a 15, 20, or even 35-year term?Your realtor can help answer questions about mortgage terms. And, you can use the mortgage calculator tool to play around with different loan time periods and rates to get a better idea of how these can impact your monthly payment.


3) Consider more than just the interest rate

Finding a great interest rate for your new home is what most home buyers focus on when selecting a mortgage company. However, the advertised mortgage rate shouldn’t be the sole reason for selecting the right lender for you.


In addition to the interest rate, there are many other fees and costs that can impact how much you pay for your mortgage. So, it’s important to get a full list of fees and expenses with a Good Faith Estimate. See #5 for more information on fees.


You’ll be working closely (hopefully, if all goes right) with your mortgage lender so other factors should be considered when choosing. The relationship does matter, so take time to call the prospective lenders to get more information. Other factors to consider when choosing a mortgage lender include:


  • Transaction speed & efficiency
    When it comes to mortgage loans, delays can be disastrous and cost you money. Look for a lender that can process loans in a timely manner – and can back up their claims with proof.


  • High level of customer service
    Look for lenders that you feel comfortable with. What is your first impression of the lender – do they respond to you like a valued customer or just another transaction? Do you have confidence you’ll be able to reach a real person on the phone when you need one? Does the lender have the right knowledge and can they answer your questions in a helpful way?


  • Dependability & reliability
    The last thing you need during your home buying experience is unplanned surprises and delays. Being able to trust your mortgage lender to do what they are supposed to do can take much of the burden off your shoulders.Your realtor will have insight into the lenders’ track records so you know you’ll end up with someone you can trust.


  • Experience & knowledge
    Does the lender have experience with loans like yours? Are they experts in the mortgage loan business? Do you feel like your lender can guide you through the complicated process?Knowing you are in experienced hands is an important consideration when evaluating lending companies.

4) Consider which type of lender is best for you

Just like there are a variety of loan types and terms, you also have choices for what type of institution you go to for your mortgage loan. Here are a few considerations for types of loan companies:

  • Large or small lending company
    You probably have a very good idea already of how you prefer to handle complex transactions. Some people prefer larger companies with lots of support teams, large waiting rooms, and a variety of product and service lines. Others prefer a smaller company with a more personalized level of service. Either way, have this in mind when choosing a mortgage lender so you feel comfortable with their environment and level of service.


  • Bank, broker, or credit union
    There are pros and cons to different types of mortgage providers, and worth considering when choosing your lender.

    • Big banks often advertise low mortgage rates, but may also have extra fees and charges that can negate the rates. Banks also may offer more loan choices and incentives based on whether you are a long-time bank customer. However, banks usually have more layers and are often more rigid. For this reason, using a big national bank may result in costly delays which could hurt you.
    • Mortgage brokers are specialists in the mortgage process and matching the buyer with the right loan type and lender. Mortgage brokers act as an intermediary between the lending institution and the buyer. Brokers typically have local offices and deep relationships with many lending institutions. Since a broker acts on your behalf negotiating rates and managing the underwriting process, this can be a huge savings of your time and money. Also, brokers typically don’t keep ‘banker’s hours’ as their mission is to get your loan approved, processed, and closed on time.
    • Credit unions might be a good source for some mortgage loans as they often offer member only rates. When looking at a credit union, make sure you investigate their level of local customer service, a variety of loans, and a complete schedule of rates and fees. See #5 about Good Faith Estimates to get true comparisons between lenders.


  • Local vs online
    When shopping for rate alone, you might be tempted to check out many of the online mortgage providers. Online providers can be a good source for those who know exactly what they need and don’t require a lot of guidance or customer support. For others, you might be better off with a mortgage lender that has a local office.


5) Ask the right questions

When looking for the right mortgage lender for you, it’s good to look at 2 to 3 different vendors. When evaluating lenders, it isn’t just about the mortgage rate as mentioned above. You should also understand the differences between each lender to help decide if they meet your needs.  Here are a few key topics to research:

  • What is the application process for the lender?
  • What is their average time to closing?
  • What are the mortgage lender fees and other third-party fees?
    Hint: Ask each lender for a full Good Faith estimate. This is a formal document that outlines all fees involved including the mortgage rate, prepaid expenses and other expenses such as property taxes and homeowner’s insurance.
  • What are the terms of the loan including down payment required and cash needed at closing?
  • Does the lender have experience with loans like yours?
  • What are the loan requirements such as debt-to-income, down payment and credit score?
  • What other companies do they work with for home loan services such as appraisal, title insurance, and escrow?
  • What options do they offer to lock in a rate?
    Since mortgages are traded in the financial markets, rates can go up and down depending the market. An unexpected increase in your mortgage rate can throw some nasty kinks into your planning if not prepared. Likewise, decreases in mortgage rates can improve your buying power. Ask your lender about options to lock in a specific rate and any float rate options that give you more flexibility for a fee.

6) Trust but verify

It would be nice if every company lived up to their promises and advertising. But, unfortunately, it is up to us to do a little sleuthing to verify a what others are saying also.


You can check the mortgage lender’s website as a starting point, but also check out third party reviews and ratings from other people who have used their service.


These reviews and ratings can be a great way to see how other home buyers view their experience – good and bad. Check out the lenders’ ratings and reviews on Google, Yelp, or other online directories. And, don’t forget to check out the lender’s Facebook page for more insight from customers.


Your realtor is a great source of information on local lending companies. And, ask your friends and neighbors about their mortgage lender experience.

If you would like more information about great mortgage lenders in your area, give us a call at 469-634-0932 anytime. We’d love to answer your questions!

About the Judi Wright Team

Judi Wright/The Judi Wright Team is a real estate group specializing in the suburbs of Frisco, Plano, and surrounding areas. Named the “Best Realtor in Dallas,” by D Magazine eleven times and a Five Star Realtor with Texas Monthly, Judi is also a Company-Wide Top performer with Ebby Halliday and the #1 Top Small Group for Ebby Halliday Frisco.

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