7 Tips to Find the Best Mortgage Lender

The demand for mortgage refinancing is white hot right now because mortgage rates are at all-time lows.  That means that mortgage lenders are busier than ever and more likely to make mistakes, fail to follow through, or be unresponsive.  Finding a quality mortgage lender is perhaps more important then ever.  

Here are a few tips on how to get the best mortgage lender by your side:

1. Ask For Referrals

Referrals are most often the best way to get connections to a reliable mortgage lender. Ask your friends, colleagues, and family members for recommendations of mortgage lenders that provided them with satisfactory service. If you have recently purchased a home, ask your real estate agent for advice. Since they typically work with plenty of lenders, they should have great options for you--their livelihood depends on it! And you can expect a non-biased referral because agents are barred from receiving commissions for referring clients to a mortgage lender.

2. Understand the Mortgage Lending Market

Understanding the mortgage lending market will help you know what your options are when choosing the best mortgage lender. It’s wise to know the players in the lending field and what advantages each player offers. Several lenders to choose from include:

• Mortgage brokers
• Banks, savings & loans, and credit unions
• Mortgage bankers

3. Contact Local Lenders and/or Brokers

In addition to the online sources such as Quicken Loans, Bankrate, and Lending Tree, check out local lenders such as community banks, credit unions, and savings & loans.  These smaller lenders can be quite competitive on rates and terms, and they may not be as overwhelmed as the national players. Another option is to use a local mortgage broker to find a lender for you.  Even though they get paid a fee (by the lender), you may save money and certainly will save time compared to searching on your own.  Just Google "mortgage broker near me" or use one of the online referral services. 

4. Compare Rates and Fees 

The interest rate a mortgage lender offers on their loan should be a significant factor in your selection. Even a difference of .125% can mean hundreds or thousands of dollars in interest expense over the life of a loan.  However, don't ignore fees and expenses in your comparisons. Most lenders make their money by charging an "application fee," "origination fee," or "processing fee."  The terms vary, and so do the dollar amounts.  

5. Ask for a "Loan Estimate"

A Loan Estimate is a free, standardized form regulated by the Consumer Financial Protection Bureau.  You should request one from each lender who is a "finalist" in your search.  (Some lenders will charge a small fee to cover the cost of a credit report on you.)  

6. Ask Plenty of Questions

Ask a lot of questions. Don’t assume anything. Find out what documentation will be required in your application. Determine what fees need to be paid, and when.  Ask about all fees and expenses--those you can shop for on your own and those you can't.  Make sure that you and the lender agree on what your rate and terms will be.  

7. Finalize and Lock

Once you have finalized your selection of a mortgage lender, it's time to consider locking in your rate.  Most lenders will lock your rate for 30, 45, or 60 days, sometimes even before you pay the application fee, though some will wait until after your loan has been approved.  Be sure to build in a cushion so that you won't be panicking to close before your lock expires. Some lenders will even offer a "float down" lock that will allow you to take advantage of a drop in interest rates.  But this will come at a cost. Even a plain vanilla lock has a cost which can be explicit but which is usually baked into the mortgage rate.