When choosing a mortgage, you should take a couple of parameters in your decision.
First, it’s important to look at each of the different options when it comes to getting a house of your own. By knowing what’s out there and what’s available you’re going to be better prepared for what’s best for you. Whether you have a large amount that you can put into a down payment or a small amount, and whether you want a fixed or adjusted rate mortgage, you can find something. You’ll be able to find some great benefits through each of these programs as well.
You just want to make sure you’re weighing things out appropriately and that you’re working on what’s going to work best for you and your family in the long run, whether that’s paying equally right from the start or paying a little now and a whole lot more later on.
Here are The Smart Investor select’s picks for the top mortgage lenders of 2022:
Quicken Loans is best suited for the borrower who embraces technology, meets reasonable standards for credit score (+620), and can qualify based on their income and ability to demonstrate down payment and reserve requirements for Quicken Loans’ programs.
If you have low credit scores or unverifiable income, Quicken Loans is probably not where you would go for your financing. Otherwise, they are the industry gold standard.
Sofi Mortgage is a solid loan partner for the best loans in the market. The Company specializes in personal finance, and its products are geared towards providing financial empowerment for individuals seeking loans. Sofi requires a minimum credit score of 660 and a minimum down payment of 10%.
Sofi provides full digital support for clients and does not require private mortgage insurance for jumbo loans. Some of the loan plans offered by the provider include Jumbo loans, adjustable-rate mortgage, FHA loans, VA loans, cash-out refinance, and fixed mortgages. The initial process to get a loan can be started online, and once the preapproval has been passed, you will be assigned a loan officer who will work you through the loan process.
Suntrust is best suited for the borrower who can deal with technology, meets reasonable standards for credit score (620+), can qualify based on their income and demonstrate down payment and reserve requirements for Suntrust’s programs.
You do not have to have the highest credit scores or significant cash down payment for their loans. Suntrust has a solution for most borrowers, including some that require no cash down and a workaround for jumbo borrowers who cannot meet the reserve requirements.
Better Mortgage provides an excellent online service where resources, loan approval and rates are readily available. It also offers different mortgage and loan options for individuals that want to buy home; Better Mortgage provides a coherent and easy to navigate the loan application process and does not charge any fee. The Bank uses an outstanding digital mortgage experience, which makes it easy to get a rate quote immediately and verified preapproval within 24 hours. The Better Business Bureau has accredited better Mortgage, and it has an A+ rating with four stars out five stars from 238 customers that provided reviews.
Federal housing administration (FHA) loans, bridge loans, jumbo loans, and conventional out loans. To get a conventional loan from Better Mortgage, you need to have an excellent credit score, FICO score of 620 or more and an income to debt ratio of about fifty-five percent.
The Better Business Bureau has accredited better Mortgage, and it has an A+ rating with four stars out five stars from 238 customers that provided reviews.
Chase Mortgage is one of the top-rated lenders in the lending industry. Serving more than 60 million households in the U.S with home lending advisors in about 30 states readily available on phones and email shows how credible chase mortgage is.
The Bank offers a full menu of fixed and adjustable-rate loans, including the federal housing administration loan, veteran administration loan and jumbo loan of up to $3Million. Chase also offers a low-down payment and a low-income option called the DreaMaker Mortgage.
The DreaMaker mortgage program is designed to assist individuals buying a home for the first time, and individuals with low to moderate-income afford a mortgage and buy home. The DreaMaker program also helps individuals buy a home with a down payment of 3% and no minimum borrower contribution.
How to Find the Best Mortgage Lender?
How Do You Get a Mortgage?
If you want to get a mortgage, there are some steps that you will need to take first. You do not want to skip them, as doing so can make the process a lot more difficult for you.
This is how you can get a mortgage:
- Check on your finances
- Know how to choose the right mortgage
- Research all lenders
- Get preapproved
- Fill out and submit your application
- Start underwriting
- Get ready for the closing
Don’t worry if the process seems overwhelming! We are going to take you through all of the steps below, so be sure to keep reading!
1. Check on Your Finances
Before you do anything else, you need to be sure that you are financially prepared to own a home. If you have a lot of debt or nothing saved for the closing costs, you are going to have a much harder time.
Lenders are not willing to give loans to people with a lot of debts. Plus, if you do not have a credit history or a low credit score, they will also not consider you. You will want to work on your debts and credit history before you take the next steps to getting a mortgage.
Your credit score will also impact the interest on your mortgage. That means that you will want to have it as high as possible before you apply.
2. Know How to Choose the Right Mortgage
You need to go into this with some idea of what type of mortgage is going to be right for you. Usually, fixed-rate options are best, since they stay consistent over time. You will only want an adjustable-rate mortgage if you plan on moving again soon. This is because the interest will start low, but steadily rise.
Plus, you will need to consider the mortgage term.
3. Research Lenders
Before you sign any paperwork or fill out applications, make sure you know everything about the lender. Do as much research into them as possible.
4. Get Preapproved
Next, you will want to be preapproved for the loan. It is helpful in determining how much your loan will actually be. Plus, it allows you to give the home sellers a good idea of what you can offer them.
5.Submit Your Application
Once you are preapproved, you will need to submit an application. The lender will likely ask for personal documents, such as your ID and SSN. They will also want to see proof of your income.
During this period, you will be waiting for the lender to review your information and look at your credit report. They also will appraise the value of the home. This step involves a lot of patience and waiting.
Finally, the home is yours! You will want to make sure it is in the same condition as when you first viewed it. The lender may require a check from your bank or a wire transfer for the closing costs.
What is Prequalification?
Prequalification allows you to receive an estimate of what the lenders may be able to offer you. This is going to be based on the information you give banks about your finances. You usually want to try to prequalify for a few reasons.
It allows you to research the different lenders and see what taking a mortgage out with them is going to cost you. That way, you can better select a lender and save yourself a ton of money during the course of your mortgage.
During the prequalification process, you might be asked questions. Lenders are going to dive into your complete credit history, meaning they may notice some things that you forgot about. If they bring them up, you will want to answer them honestly and be prepared to respond.
For example, they may notice you used a credit card to pay off a loan. The lender will likely ask about those sorts of instances, so you will need to be prepared to discuss it with them.
Once they are done looking into your credit, you will receive their prequalification estimate. This amount is what the lender believes they could offer you in the future, if you apply with them.
Why is it Important to Shop Around and Compare Lenders?
By comparing loan estimates and interest rates, you will be able to find the option that costs the least. Interest rates can especially impact the total cost of the loan for you- especially if you are going to be paying on it for years.
Since this is a loan you will likely be working on for the foreseeable future, you will want to ensure that you are locking the best possible rates now. That way, you do not end up spending thousands of dollars you really did not need to.
What to Compare?
There are some aspects you will want to compare between lenders. The APR, or annual percentage rate, is going to give the best picture of what you will actually be paying for the mortgage.
We recommend that you compare the APR, but also any other numbers the lenders offer to you. The more you have to compare, the better off you will be.
How to Choose the Best Mortgage Lender For Your Needs?
The only way to determine which mortgage lender is right for you requires that you shop around and do your research. There are also several options that you can consider when it comes to lenders.
- Credit Unions
- Online lenders
Those are the three most popular options when it comes to lenders. You will want to ask each of them for their rates and loan terms, as well as their closing costs. Once you have all of the information, you can begin to compare and determine which one suits your needs the best.
Banks and credit unions tend to be the most popular choices. They offer good interest rates and allow you to get to the closing process without much hassle. However, online lenders are becoming more and more popular.
Online lenders tend to be much faster than brick and mortar banks. Although, they may not offer you as high of an amount.
What are Your Needs?
Of course, you should also be familiar with your needs. They are going to be:
- Your budget
- Who will accept your credit score
First of all, you will need to ensure that your mortgage is not unmanageable- you will need it to fall within your set budget. Consider utilities and other costs that are going to come with it.
Next, what banks or credit unions will consider your credit score? If it is low, you are not going to have as many options as someone with a high credit score. On the other hand, those with higher credit scores will be able to shop around a lot more and receive a lower interest rate.
What Score Can Get You the Best Mortgage Rate
A credit score of 700 or higher is likely to get a lower interest rate. You may still qualify with a lower score, but you will end up paying more in the long term.
A FICO score of 740 or more is typically considered excellent credit. This range allows you to receive the most benefits on your mortgage. However, you will still want to conduct research into all of the rates available to you.
Keep in mind that it is still possible to get a mortgage with low credit, it is just more challenging to find decent rates. You may end up paying higher payments.
The Risks of Taking a Mortgage
Just like with any other type of loan, there are certain risks to taking out a mortgage. They take a very long time to pay back, so you will need to be 100% sure that you are financially prepared. If not, you could be exposing yourself to those mortgage risks.
Think of the Future
You will need to spend a lot of time thinking about what your financial situation is going to be like during the mortgage, and not just what it is like right now. If you can not pay the mortgage, you could lose the home and be required to move out.
If you are planning on starting a family, changing careers, returning to college, or have an income based on sales, your financial situation would be changing. Those factors could all cause you to be unable to pay back the mortgage. Plus, you need to also be sure your job is secured.
What is a Mortgage Shopping Worksheet?
A mortgage shopping worksheet is something you can use to determine what mortgages are the best for you. You should fill it out as you do your research into lenders and shop around- it will make it much, much easier to pick a quality loan that suits you the best.
The FTC even offers their own official mortgage shopping worksheet for free, allowing you to evaluate your lenders and the entire mortgage situation.
You will need to learn all of the basic information on the loans to completely fill it out. So, as long as you do not leave any areas on the page blank, they are very helpful in determining which mortgages are going to be the most beneficial to you.
How to Use Mortgage Shopping Worksheet?
The worksheet allows you to compare multiple offered mortgages. It also requires that you find the loan terms, APR, prepayment penalties, and other helpful information. Once you have put all of it into the worksheet, you will be able to easily see what you are working with.
Overall, you should fill it out. The worksheet is designed by the FTC to help you determine what mortgages you can and can not afford. If you do not fill it out, you may have trouble noticing which options are best- meaning you could choose a very expensive option that harms your finances.
How Credit Score Affects Your Mortgage Rate
Did you know that a difference of 100 points on your credit score could save you thousands of dollars? That is why you will want to try to raise your score before you apply for a mortgage rate, if it is possible.
This is because lenders are going to view your credit score and see it as a way to determine how likely you are to pay them back. If the number is low, they will see you as being risky to lend funds to, and will likely not go through with it.
How Does COVID 19 Affect the Mortgage Industry?
The coronavirus is deeply impacting the mortgage industry. Credit score requirements are different now, as well as loan availability. Right now, rates are currently low and expected to stay low for awhile.
Some borrowers were able to qualify for direct financial support from the government, so that they could continue to pay off their mortgage. Others were able to receive mortgage forbearance.
If you have experienced loss of income, then you will want to reach out to your lender. Many have options for adjusting your mortgage if you were impacted by the pandemic.
Additionally, many lenders are meeting with their potential borrowers online now. This process is much safer, allowing you to discuss your options and offers with the lender, without having to see them in-person.
Now is a Good Time to Buy a House?
Because of the pandemic, mortgage rates are at the lowest they have been in a long time. As we explained previously, low rates are really good- they mean that you will be paying a lot less for your home in the long term.
If you are financially stable and believe that you will be in the future, now is a great time to purchase a house.
Important Mortgage Questions to Ask Your Lender
Before you make any final choices on offers, there are some questions that you will need to ask your lender. You want to know as much as possible about the loan before you sign, plus, the lender is required by law to provide you with information.
These are the most important mortgage questions you will need to ask the lender about:
- What is the down payment amount?
- Do I qualify for down payment assistance?
- What is my APR?
- What is the interest rate?
- Are you going to do a hard credit check on me?
- What is my monthly payment expected to be?
Down Payment Assistance
You will want to ask your lender if you qualify for down payment assistance. They should be able to assist you through this process.
If they do not offer it, then they are probably not going to be worth your money in the long run.
Hard Credit Checks
If there is going to be a hard inquiry on your credit, you will need to know. This type of check will show up in your credit report, which can impact your credit score. If you are shopping around (which you should be), you will need to know which lenders are doing hard checks.
This is because your credit will drop if there are multiple hard checks done within a week or so. By spacing them out, you can lessen the damage caused by them.
Finally, you will need to know what your monthly payments are. That way, you can start building a budget early, allowing you to set yourself up for success with your mortgage.
Make sure that there are no penalties for paying too much- you do not want to agree to anything with a prepayment fee. They make it more expensive if you suddenly need to move away.
5 Tips to Improve Mortgage Eligibility
There are several ways that you can increase the odds your lender sends you an offer. You will want to start making changes in advance to your finances for them to have an impact. These are our tips for you:
- Pay off your debts
- Improve your credit score
- Save money
- Change your debt to income ratio
- Make a big down payment
1. Pay Off Your Debts
If you have too many other debts, lenders will think you will not be able to pay them back. Make sure that you pay down your other loans first. This will increase your odds significantly of being sent a mortgage offer.
2. Improve Credit Score
As we mentioned before, credit scores let lenders know how likely you are to pay them back. If you can raise it, you will want to do so before you begin the mortgage hunting process.
3. Save Money
If you can save more money, lenders will notice. They are much more likely to make offers to those who have a lot of money saved in their various accounts.
4. Change Your Debt to Income Ratio
This ratio compares your total debts to your income. If the debts are much higher, the lender will believe that you do not have room for any more loans- and they will not make an offer with you.
The ratio is determined by comparing your gross monthly income with your monthly debts. Paying down your debts and raising your income is helpful in changing this ratio.
5. Make a Big Payment
Finally, it greatly helps if you can make a large down payment. Doing so will show the lender that you have the ability to save up a lot of money. Plus, the mortgage amount you need to take out is a lot smaller.
What Can We Learn From J.D. Power Mortgage About the Different Lenders?
J.D. Powers conducted a study which found that the U.S. is currently at a record low of interest rates. This is the lowest it has been in 14 years, allowing many people to refinance their mortgages for a better price.
However, we can also tell that it came about due to the pandemic. 2020 was a complicated and stressful year for many industries, including the mortgage industries. They needed to lower their interest rates, so they would not go out of business.
Still, this allowed many borrowers to receive rates that they would not have been able to not that long ago.
Due to the lowered interest rates, the satisfaction of borrowers towards their lenders also rose significantly. The average refinancing processing time increased as well by a few days, likely due to the amount of people that were able to do it now.
More people also chose to use self-service channels than they had in the past. However, this also led to increases in satisfaction from borrowers. The more self-service channels that were provided, the more liked the company was.
What Can We Learn From Trustpilot and BBB Ratings About the Different Lenders?
Before you decide to go with an offer, make sure that you check out Trustpilot and the BBB ratings for that lender. These sources can provide you with plenty of data on whether or not the company is reliable and going to be worth your time.
We recommend that you check out the Better Business Bureau’s website for mortgage lenders. You will be able to see how each company compares and whether or not they are accredited through the BBB- never take an offer from a lender who is not.
Plus, Trustpilot is the place to go to view user experiences. You will be able to see how people who bought the companies’ services feel and whether or not they would recommend it to others. If you notice an overwhelming amount of negative feedback, you will want to go with someone else.
Overall, there are many different lenders out there. Your best bet to sort through the reliable and shady lenders is to check out online reviews and rankings. All of this information is free to find on the internet, so you can consider it part of your general mortgage research.
How to Negotiate For Better Mortgage Conditions
It is a good idea to try to negotiate for a better mortgage rate, if you can. There are many ways that you can go about doing this. We have prepared some tips for you to use:
- Research and compare loan rates
- Ask if the lender can match your other offers
- Make a big down payment
Your interest rate is going to be negotiable. You will want to research plenty of lenders and receive offers from each of them. From there, you will want to compare them yourself and find the best ones.
Now that you have plenty of offers, you will want to ask a lender if they can match them. If you were given a lower rate, you can use it to negotiate with another lender.
You can do this for your interest rates, your fees, and more. Basically, this method can be applied to most numbers within the mortgage agreement.
Making a large down payment can also help ensure you receive better rates. The size of your down payment actually impacts your loan to value ratio– which gives you much better rates.
ARM VS Fixed Rate – What’s the Difference?
These are two different forms of interest. ARM rates will reset at certain periods, while fixed-rate mortgages will never change. ARM rates can raise, while fixed-rates will not.
When to Use ARM
Overall, you generally will want to go with a fixed rate. The only case where you do not is when you know that you will be moving soon. That way, you can get the lower starting ARM and move before it raises.
However, if you do not move before that time, you will receive the higher interest rate- which could cost you thousands of dollars over the course of a few years.
Mortgage Mistakes You Must Avoid
These are common mortgage mistakes you will want to be aware of:
- Not knowing your credit score
- Not saving for the down payment
- Not researching and shopping around
- Not locking your interest rate
- Not knowing your budget beforehand
Overall, you will need to be aware of all aspects of your finances before you apply for a mortgage. If you do not know your budget, then you may take out a loan for more than you can afford- which would be very financially damaging.
Most of the common mistakes are caused by not doing research into lenders, so you will need to ensure you do yours!
Is it Better to Get a Mortgage From a Bank or Lender?
Both come with their own pros and cons. To summarize them, banks are slower but more reliable. They also have lower interest rates available for those with higher credit scores. Lenders are less strict, faster, and have more loan options. They are only online, which is a con for some.
What Else You Should Consider
There are some other fees that come with mortgages. You will need to be aware of any origination or lender fees you are responsible for. They can add up quickly, especially with a downpayment.
As long as you shop around, you should have confidence in your choice as well. Be sure to read more of our articles if you want to learn more about how loans and mortgages work!