How to Choose a Mortgage Lender?

Conventional Loans. The most common type of mortgage is for borrowers with good credit scores (typically 620 or higher) and stable financial situations. Not government insured and requires a down payment from 3% to 20%, PMI is required if less than 20% down. Offered by banks, credit unions, online lenders, and mortgage brokers, very accessible. Borrowers can choose fixed or adjustable rates and while conventional loans offer more flexibility with terms, they have stricter qualification requirements compared to government-backed loans.

Government-Backed Loans. Insured by federal agencies, these loans are for borrowers with lower credit scores or smaller down payments. FHA Loans, best for first-time buyers or those with limited savings, require 3.5% down and a 580 credit score but include mortgage insurance premiums that increase long-term costs. Available through banks, credit unions, online lenders, and FHA-approved mortgage brokers. VA Loans, for veterans, active duty military, and eligible family members, no down payment, competitive rates, and no private mortgage insurance, offered by VA-approved banks, credit unions, and specialized mortgage companies. USDA Loans, for moderate-income buyers in rural or suburban areas, with no down payment and low interest rates, are offered by USDA-approved banks, credit unions, and mortgage brokers familiar with these programs.

Specialized Mortgages. For specific financial situations, these loans have specific requirements. Jumbo Loans, for properties above conforming loan limits, require excellent credit and a large down payment, offered by banks, credit unions, and portfolio lenders that do high-value loans. Interest Only Loans, payments only cover interest for a set period, short-term affordability but higher future payments, available through niche lenders, mortgage brokers, and some banks. Balloon Loans, are low initial payments with a large lump sum due at the end of the term, for borrowers who plan to refinance or sell and are offered by private lenders, hard money lenders, and portfolio lenders that do non-traditional financing.

Fixed Rate. These loans have a fixed interest rate and monthly payment for the entire term of the loan (usually 15 or 30 years). Predictable payments, stable budgeting, and protection from rate increases. Higher initial interest rates compared to ARMs. Best for buyers who plan to stay in their home long-term or want financial stability.

Adjustable Rate Mortgages (ARMs). These loans start with a lower interest rate which adjusts periodically after an initial fixed period (e.g. 5/1 ARM: fixed for 5 years then adjusts annually). Lower initial rates and monthly payments. Payments can increase significantly after the adjustment period. Best for buyers who plan to sell or refinance before the adjustment period ends or who expect a future increase in income.

Banks. Traditional financial institutions offer a wide range of services, including mortgages. Banks like Chase, Bank of America, and Wells Fargo are known for their stability and in-house processing. They often offer competitive rates and discounts for existing customers. However, they have stricter qualification requirements, so better for borrowers with high credit scores and a steady financial history.

Credit Unions. Member-owned institutions that focus on customer service and community. Examples are the Navy Federal Credit Union and San Diego County Credit Union. They offer lower rates and fees compared to banks but may have fewer mortgage options. These lenders are for members who want competitive rates and a more personalized experience.

Mortgage Brokers. Intermediaries who work with multiple lenders to find the best mortgage options for their clients. Companies like AimLoan and MortgageDepot offer access to many loan products. Brokers can help borrowers with special situations or those who want customized mortgage solutions. They charge fees for their services, which should be added to the overall loan cost.

Online Lenders. Digital-first platforms that simplify the mortgage process. Rocket Mortgage, Better Mortgage, and Guaranteed Rate are well known. These lenders are for convenience, speed, and online tools. They are good for tech-savvy borrowers who want to manage the application process entirely online but may have limited personal service.

Private Lenders. Institutions or individuals who lend outside the traditional banking system. LendingHome, CoreVest Finance, and Patch of Land cater to real estate investors or borrowers with non-traditional needs. They offer flexibility but often at higher rates, so good for short-term or investment-focused borrowers.

Hard Money Lenders. Specialized lenders that offer fast, short-term financing, often secured by property value rather than borrower credit. Examples are Kiavi, RCN Capital, and Easy Street Capital. These loans are good for property flippers or developers who need quick cash but come with higher costs and risks.

Portfolio Lenders. Lenders who keep loans in their portfolio instead of selling them on the secondary market. First Republic Bank, Flagstar Bank, and New York Community Bank offer customized loan terms and may work with borrowers who don’t fit conventional criteria. These are for clients who want flexibility and personalized solutions.

Government-Backed Loan Lenders. Institutions approved to offer loans insured by government agencies. Veterans United Home Loans and Quicken Loans are the leaders in VA and FHA loans, while USDA Rural Development supports rural homebuyers. These lenders are for borrowers with lower credit scores, smaller down payments, or specific eligibility such as veterans or rural residents.

Get Offers the Same Day. Interest rates change daily, so it’s important to get loan offers from multiple lenders at the same time. This way you can compare fairly and accurately based on the same market conditions.

Get the Same Loan Product. To compare effectively, ask for the same loan type, terms, and amount from each lender. This way, you can eliminate the inconsistencies and make an informed decision based on like-for-like offers.

Know the 45-Day Credit Inquiry Window. When shopping for a mortgage, multiple credit inquiries within a 45-day period are treated as one inquiry by most credit scoring models. This minimizes the impact on your credit score and allows you to shop around confidently.

Compare the APR. Look beyond the interest rate and look at the Annual Percentage Rate (APR) which includes the interest and additional costs like origination fees. The APR gives you a clearer picture of the total cost of the loan over time.

Evaluate Hidden Fees and Terms. Review each offer for fees such as prepayment penalties, application fees, or mandatory insurance requirements. Make sure you read the fine print to avoid surprise costs and unfavorable terms.

Use Online Calculators. Use mortgage calculators to input loan details like interest rates, loan amounts, and terms. These tools will help you estimate monthly payments, total loan cost, and how different interest rates or down payments will affect your budget.

Create a Comparison Table. Put lender offers in a table to compare rates, fees, and terms. Include key items like APR, closing costs, prepayment penalties, and monthly payment estimates so you can see at a glance which one is the cheapest.

What types of loans do you offer? Make sure the lender offers the loan type you need.

What are the fees? Ask for a breakdown of fees like origination, appraisal, and closing costs.

How fast is the approval process? Confirm timelines for pre-approval, underwriting, and closing.

Can I lock in my interest rate? Ask about rate lock options and costs to avoid market changes.

Are there prepayment penalties? Understand any restrictions on paying off the loan early.

Do you sell loans after closing? Check if the lender will continue servicing the loan or transfer it to another entity.