How to Choose the Best Mortgage Lender
Choosing the right mortgage lender saves you time and money. But how do you find the best mortgage lender?
- Compare mortgage rates by requesting quotes
- Interview a few of the top candidates
- Pick a lender you trust with competitive pricing
Note that the best mortgage lender for you won’t necessarily be the best lender for your neighbor.
Prequalify for a mortgage in about five minutes.
Get Mortgage Quotes
Mortgage lenders do not all charge the same interest rate. Some are very efficient and do so many loans that they can afford to make less on each transaction. Others are cheaper because they only work with perfect borrowers. And some charge less because they are understaffed and take all year to close loans.
Rates are important, but bad service can cost you a lot more than a small difference in interest rate.
That’s why you have to look further.
Lender Guidelines Vary
Not all mortgage lenders have the same underwriting guidelines. All lenders need to meet the minimum guidelines by FHA, VA, USDA, Fannie Mae, and/or Freddie Mac. But most also impose additional requirements called overlays.
Lenders add overlays to reduce the chance of having bad loans. Too many defaults or foreclosures, even if the lender follows the program rules to the letter, can cost a lender its approval to fund loans from agencies like FHA or corporations like Fannie Mae.
The FHA allows lenders to approve 96.5% loans to borrowers with FICO credit scores as low as 580, for instance. But many lenders set their minimum credit score at 600, 620, or even higher. That’s an overlay, and if you’re concerned about getting caught by one you need to find a lender with no overlays.
Lenders With No Overlays
Gustan Cho Associates adds no overlays to government and/or conventional loan underwriting. As long as the file gets a passing grade from the automated underwriting system (AUS) of the agency or corporation, Gustan Cho Associates will approve it.
Word of Mouth
There are many sources of mortgage funding. A mortgage lender can be a mortgage banker or mortgage broker. They work in credit unions, banks, investment firms, insurance companies, mortgage companies, savings and loans, and mortgage brokerages.
It’s smart to ask for referrals from friends, Realtors, attorneys, insurance agents, or anyone who you trust to make a thoughtful referral.
Not all mortgage lenders can suit every borrower’s needs. For example, borrowers with credit issues may need to seek a mortgage lender who specializes in bad credit mortgage loans.
It’s smart to check a lender’s status with its licensing board. The Nationwide Mortgage Licensing System (NMLS) is a database of licensed mortgage loan officers and lending companies that consumers can search to make sure their lender is in good standing.
You can put a lender into the NMLS search box and get its licensing information.
Signs of a Great Mortgage Lender
Great mortgage lenders can make the home buying experience a pleasure, and bad ones can make it an expensive nightmare. Here’s what to look for in a mortgage lender.
They ask questions
It is impossible for mortgage lenders to provide an accurate mortgage quote without some information from you.
Expect questions concerning your credit rating, how long you expect to own the home, home use (vacation, rental, primary residence), and property type (condo, duplex, single-family home, etc.).
A great lender takes your answers and offers mortgage options that make sense for your needs.
They have knowledge
Knowledgeable mortgage pros know their industry and their products well enough to explain them in plain English. A great lender wants you to understand what you’re signing.
But a loan officer who hides behind a load of jargon may not actually understand the terms he or she is throwing at you. Even licensed loan officers don’t know everything about all programs. You need one who is an expert in helping borrowers like you.
Great mortgage lenders know that their biggest asset is their reputation, and each will go the extra mile to make you happy as the customer.
They solve problems for you
Experienced mortgage bankers and brokers expect the unexpected. They have experience dealing with glitches and monkey wrenches. Glitches are not uncommon so this is important.
The mortgage program you need was discontinued? An underwriter wants you to explain recent credit inquiries? Are there mistakes on your credit report?
A great mortgage lender will find a new program, help you write an letter of explanation or order a rapid rescore to fix your credit. Don’t risk getting a loser who falls apart when the going gets tough.
Great mortgage lenders communicate in the style that you prefer. Whether that’s email, a text, or a call to your home, cell or office.
They keep you informed as much as you want them to, but don’t drown you in updates if you don’t want them. They return your calls, your emails, and your texts promptly.
Bad mortgage lenders, by contrast, make chasing new clients a higher priority over serving the clients they already have. And they evaporate if there is bad news to deliver.
They honor your comfort zone
Just because you can get approved for a specific loan amount doesn’t mean that you should.
If you can technically afford a $600,000 mortgage, but the payment makes you dizzy with fear, a great lender won’t push you. He or she can help you with a smaller loan size, a different mortgage program, or perhaps some budgeting help.
When you work with a great lender, the priority your comfort and financial wellbeing. Abd future business, of course.
Specialty Mortgage Lenders
Not every mortgage lender can meet your individual needs.
Many lenders have their own internal overlays and don’t deal with certain credit profiles, products or loan amounts.
In addition to traditional lenders offering Fannie Mae and Freddie Mac loans, FHA and VA products, there are portfolio lenders who create their own loan products and guidelines. You might find products like these:
- Bank statement loans for self-employed
- One day out of bankruptcy or foreclose loans
- Super jumbo loans for very expensive homes
- Loans against your investment portfolio at a brokerage
- Loans for farms or unusual properties
- No income verification loans for investment properties
These non-QM loans or non-prime loans don’t work for everyone but they are helpful to people with specific sets of circumstances.
Ask an Expert
Gustan Cho Associates has ZERO OVERLAYS on government and conventional loans.
Home Buyers who need to qualify for a mortgage with a national five-star direct lender with no mortgage lender overlays on FHA, VA, USDA, Conventional Loans, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at firstname.lastname@example.org.
All of our pre-approvals at Gustan Cho Associates are full credit approvals that have been fully underwritten and signed off by our mortgage underwriters. This is why we close all of our pre-approved borrowers. We are available 7 days a week, evenings, weekends, and holidays.
Get a custom mortgage quote now.
August 8, 2021 - 5 min read