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Top 5 Factors to Consider When Choosing a Mortgage Lender

Did you know that 58.6 percent of the total housing units in the U.S. are owner-occupied today? This stat shows that a large number of Americans are purchasing housing units every day.

Are you ready to purchase a new home?

Your choice of mortgage lender is one of the most crucial decisions during a property purchasing process. That’s because you will be dealing with your mortgage lender for the next two to three decades and pay them thousands of dollars in interest fees for the home loan.

A mortgage will probably be the most significant loan you take in your life. However, this loan should make your homeownership journey manageable and affordable.

Purchasing both commercial and residential properties is one of the best ways to build wealth. So, what are the factors you need to consider before choosing a mortgage lender? Read on to find out.

1. Look for a Lender With the Right Loan Terms

Look for the right lender with fair loan terms depending on your needs. Given the magnitude of getting a mortgage, settling for a lender with good customer service and the best loan terms should be your number one priority.

Research all aspects of the mortgage, including interest rates and other applicable fees, as well as the mortgage qualifying requirements.

For example, if you can increase your monthly payment amounts, will your lender be charging you extra for the overpayment? What will happen if you are looking to adjust your payments from a variable amount to a fixed rate, will they fine you or allow it?

Remember also to inquire about their offset accounts? Ask whether you could use one to help you save more on your mortgage.  When talking to mortgage lenders, remember to ask them all the above questions to ensure you are making the right decision.

Do not assume anything. Asking questions is the best way to set everything on the table. Before choosing a mortgage lender, ensure you also look at your finances and their qualifying requirements.

2. Consider Different Types of Lenders

When choosing a mortgage lender today, there are many options to choose from. Different types of mortgage lenders have different qualifying requirements, interest rates, and loan repayment terms. Below are the different types of lenders:


Banks often have the same type of mortgage loans. However, if you settle for a local bank, they may offer more of a one-on-one experience. You are also likely to be served by the same person from the start to the end of the process.

Unfortunately, smaller banks often have fewer online tools and mortgage options, making managing the process quite difficult. Dealing with a larger bank could be easier as they have more loan options and well-developed online loan management tools. On the downside, larger banks may take longer to process your mortgage as they have more clients.

Credit Unions

When comparing lender fees, remember to check out different credit unions. That’s because they offer lower rates compared to other commercial institutions like banks. Credit unions also prefer borrowers with higher credit scores.

Online Lenders

Online lenders do not have physical offices; thus, they can give you the convenience of handling the process online. This is an ideal option for people who don’t like in-person appointments.

They also have better rates than banks. However, be very careful as you may encounter a lot of online scammers.

3. Consider Their Loan Terms and Interest Rates

Fees, rates, and mortgage terms are essential aspects to consider when choosing a mortgage lender. When comparing lender fees, you have to look for a lender that offers the most competitive rates. Sometimes, even a slight difference such as a 1% difference in interest rate could make a significant difference.

Consider the down payment amount the lender requires and their percentage interest rate. You can use a mortgage calculator to calculate your monthly repayment amount depending on your initial deposit, interest rate, and mortgage length.

4. Examine the Lender’s Reputation and Qualifications

You may find a suitable lender with competitive rates and excellent loan terms. However, you must also ensure that they are reputable and credible. Today, it’s hard to trust just anybody on the internet, thanks to the infestation of predators and criminals who are always looking to prey on innocent and naive new homeowners.

The best way to prove a lender’s credibility is by looking at their online references and reviews. Check out independent third-party review websites and read through their past clients’ experiences with the lender. Most fraudulent companies often don’t have online reviews- if this is the case, look for another lender.

Additionally, you can visit the National Multistate Licensing System Registry website to confirm if the mortgage lender is registered in your state. You can also look through the National Association of Mortgage Brokers and Better Business Bureau to prove the company’s credibility.

5. Hire a Mortgage Broker

Purchasing a property is not an easy process, and choosing a lender makes it even more complicated. Mortgage jargon and all the information can be quite overwhelming, especially for first-time homeowners. If you feel like the data is too complex, consider getting a mortgage broker for assistance.

The mortgage broker will handle everything for you. They will go through your credit history, current, and past financial status and check your credit score to help you find the best mortgage company to fit your needs. Working with a broker will save you the time and effort of going to different lenders, simplifying your job.

Choosing a Mortgage Lender: What You Must Consider

There are some essential factors to consider before choosing a mortgage lender. Most people tend to settle for the first mortgage company they come across and miss out on other great benefits of comparing different lenders. Shopping around for the best lender will offer you competitive interest rates, good quality customer service, and fair loan terms.

Shop around and compare different lenders to find the best one depending on your needs. Now that you are purchasing a new property, you will require all the financial literacy and help you can get. Check out other posts on our website for more homeowner tips.