man in suit holding model house

How to Choose a Mortgage Lender

Owning property is a big investment, and choosing a mortgage lender can be tough. 

The good news is that you have options. Conventional mortgages from banks or large financial institutions aren’t the right fit for all homebuyers, but aspiring property owners can benefit from other flexible and customized financing options. 

When you’re searching for the best mortgage lender, you need to consult local lender reviews, compare mortgage interest rates, and speak with representatives to gain more valuable insight, such as payment requirements.

Our team explains how to choose a mortgage lender below. From evaluating credit history to calculating your monthly payment plan, TPI Group can help you find the best mortgage lender and make the process as easy as possible.

person pointing at laptop screen

How Do I Decide Which Mortgage Lender to Use?

When shopping around, start with these factors to determine the right mortgage for you:

Interest rates

Mortgage lenders offer different products, which come with varying interest rates. Potential property owners must shop around to find the best deal.

Closing costs

These include an application fee, appraisal, and loan origination fees. While the lender may offer the lowest rate, the overall mortgage costs may be too high. 

Product offerings

Always work with a licensed lender in your state to have options relevant to you.

Customer service reviews

Testimonials and reviews are a gold mine for helping you find reputable lenders who offer reasonable products and services.

Did You Know?

APR is calculated when comparing loans. It’s the annual percentage rate that includes:

  • The interest rate
  • Broker fees
  • Closing costs
  • Rebates
  • Discount points

If two lenders are offering the same nominal interest rate and monthly payments, it’s likely that their APRs will differ. The reason behind this scenario is that the lower APR includes less upfront fees and is, therefore, the better option. 

APR isn’t as effective, however, if you choose an adjustable-rate mortgage since the fluctuation in the interest rate makes it hard to predict solid numbers.

woman writing in front of man and laptop

What is a Mortgage Broker?

A mortgage broker acts as an intermediary; they bring borrowers and lenders together. They can save you time from searching and comparing multiple lenders. Mortgage brokers perform various tasks, such as:

  • Discuss and evaluate clients’ needs
  • Gather necessary documentation from the borrower for the lenders
  • Provide borrowers with quotes from various lenders

Mortgage brokers are there if you need guidance or don’t have time to find lenders. But some people may want to handle everything themselves. In that case, make a short list of promising mortgage lenders and come up with some questions to better understand their process and if they are compatible with you.

What Questions Should I Ask Mortgage Lenders?

Even though their interest rate and other factors seem adequate, it’s recommended to speak with mortgage lenders to get all the details. Here are some example questions to get you started:

  • What types of mortgage products and terms do you offer (fixed or adjustable rates, FHA loans, VA loans, etc.)?
  • Are there any marks on my credit report? 
  • What is your criteria for credit qualification? Do I require mortgage insurance?
  • What is the interest rate and APR you offer?
  • What fees and monthly payments can I expect?
  • How long do you expect the mortgage loan process to take?
  • Will you be my main contact throughout the process? How will we keep in touch?
  • Which steps will take place online and in person (i.e., appraisal, closing, etc.)?

Finding the best mortgage lenders takes time and a lot of research, including finding the right type of loan.

two woman looking at laptop

What Type of Mortgage Loan Do I Need?

Many people still think that they should go to a bank to get a mortgage and that every down payment on a home is 20%, but this is outdated thinking. 

There are a lot of choices on the market today. You can find lenders who offer conventional loans with a low down payment of 3% if you have a credit score of 620 or higher. There are also government-backed loans that come without a down payment. 

If you have a credit score of 580 or higher, you may be eligible for Federal Housing Administration (FHA) loans and make a 3.5% down payment. If your credit score is between 500 and 579, the down payment will increase to 10%.  

While you can find loans that have a down payment under 20%, it’s important to note that most lenders will increase the interest rate and require mortgage insurance as a consequence.

The Difference between Fixed-Rate Mortgages and Adjustable-Rate Mortgages

A fixed-rate mortgage ensures borrower protection from fluctuating monthly payments if the interest rate increases. They’re easier to understand and follow the same general format with each lender. However, interest rates are usually high to begin with and it’s harder to be qualified for this type of loan since the payments are not as affordable.

Adjustable-rate mortgages have a variable interest rate that starts below the market rate of an equivalent fixed-rate loan. Adjustable-rate mortgages also have a set period where the initial rate remains constant before increasing. It can, eventually, surpass the average rate of a fixed loan.

couple looking at exterior of house

Choosing an adjustable-rate mortgage is risky because you may have to pay a higher monthly mortgage payment when the rate resets. If your mortgage comes with a rate cap, you may be able to afford payment increases. On the other hand, the type of loan may make refinancing or selling your house difficult when market conditions change.

Whether or not you know which type of mortgage loans you qualify for, there are a few things to consider as you explore the mortgage lending world, such as finding the right mortgage lender.

Who is the Best Mortgage Lender? Speak with TPI

We have our finger on the pulse of the mortgage industry, which means TPI Mortgage can provide you with a customized loan package. Because we treat our clients like family, we welcome your questions and do everything we can to address your concerns, ensuring that you get the best deal and service.

Contact us today to learn more!