Choosing a Mortgage Lender

Aside from finding a good real estate agent, choosing a mortgage lender is a key step before actively hitting the market in search of a new home—unless you’re paying all cash, that is. Equipped with a mortgage loan preapproval, you’ll have a much better chance of a streamlined experience when you contract on a home. Let’s look at a few considerations when deciding which lender finances your next home purchase.

Rate comparison

Interest rates from different lenders can fluctuate slightly up or down from the national average. If you’re shopping for, say, a 30-year fixed-rate FHA loan, you might want to compare rates from various lenders to see where you’ll get the best value. You can even pre-qualify or pre-approve with multiple lenders for a better comparison, which will take your credit score and financial profile into account to home in on what loan amount you might qualify for. Bear in mind that comparing estimates from different lenders may lower your credit score.

Note: Finding the lender with the lowest interest rate doesn’t necessarily mean you’re getting the best deal for your financial goals and circumstances. If another lender offers a slightly higher interest rate but lower closing costs and a competitive APR, your break-even point on the lowest interest rate might not happen until after you’ve refinanced or moved on to another home and another loan. There are many factors involved, so it can pay (literally) to do your research.

Preferred lenders

If you’re building a new home, your homebuilder might partner with a preferred mortgage lender (ours is HomeAmerican Mortgage Corporation) that operates within the same parent organization. Because these teams work hand-in-hand every day, using your builder’s preferred lender could potentially expedite your closing process and get you into your new home faster. Moreover, some builders may offer attractive incentives for the use of their mortgage affiliate. That’s something to factor into your decision, but remember that you are ultimately free to choose whichever lender you’d like.

Loan terms

After doing the math on your finances and lining the numbers up with your homeownership goals, you’ll probably have a better idea of what kind of loan you’re looking for—in particular, what type of loan, what loan term (e.g. 10-year, 15-year, 30-year), and whether your rate will be fixed or adjustable. Armed with that know-how, you’ll be better able to choose a mortgage lender that suits your homebuying criteria and financial goals.