How to Find a Mortgage Lender

Three Methods:Understanding the BasicsFinding a LenderSealing the Deal

Typically it is not hard to find a lender. Perhaps as a result of this, almost half of borrowers don’t shop around for a mortgage.[1] However, even a small difference in the rate of interest for a loan can amount to a lot of money over the life of a 30-year mortgage. Before settling on a mortgage, you should shop around to find the best rate available.

Method 1
Understanding the Basics

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    Know your credit score. You can get a free credit report online. If you have good credit, you can use this in negotiations to bargain for a better deal. If you don’t, you should determine what is bringing down your credit. Try to settle any outstanding obligations to increase your credit and get a better deal.[2]
    • In the current market, a credit score of 740 is ideal for mortgages, but a score higher than 650 will typically qualify you for some sort of loan.
    • In addition to fixing false charges or paying off old debts, a good way to increase your score is to pay down your credit cards. Your credit score is based on what percentage of your available credit is used. If you have a card with a small maximum balance – for example, a department store card – paying this down could instantly .increase your score by 20 points.[3]
    • There are a few ways to check your credit score. Government regulations entitle you to a fee report through, though this will not include your actual score. Other websites offer "free" reports that include scores, but they often have hidden fees.[4]
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    Consider all costs. Sometimes what looks like a low-interest rate is not so great when fees are factored in. Ask for the annual percentage rate (APR), which includes points, broker fees, and credit charges. Ask for a full list of fees and an explanation of their meaning.
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    Be prepared to pay 20% down. The larger the down payment, the lower your interest rate will be. If you pay less than 20% you might be required to purchase a private mortgage insurance that might increase your monthly payments by approximately $100.[5]
    • If you are not able to pay 20% down, ask your lender if you qualify for assistance from the FHA (Federal Housing Administration), VA (Veterans Administration), or Rural Development Services.
    • Also ask about points. These are fees paid to the lender or the broker for the loan. Ask for points to be quoted in a dollar amount.
    • Determine if the rate you are quoted is for an adjustable-rate loan. If so, be wary because the rate might go up over time. Ask if your loan will also go down when rates do.[6]
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    Gather documents. You will need to provide a comprehensive accounting of your income, assets, debts, and payment information in order to get a mortgage. Requirements vary with the lender and the particulars of your financial situation. There are, however, some standard documents that are required.
    • These include: your W-2's for the last two years (if you earn a paycheck), your 1099 forms (if you are self-employed), recent paycheck stubs, recent tax returns, a complete list of debts (credit cards, mortgages, car notes, and student loans), assets (including bank statements, mutual funds, investments), and records of recent mortgage or rent payments.[7]

Method 2
Finding a Lender

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    Talk to your bank or credit union. If you have a good relationship with your current financial institution, it makes sense to begin with a quote from them. If you have a long relationship with them, you should know whether they are a reputable institution. However, it is important to shop around for other options.[8]
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    Ask people you trust. A good place to start is with friends and family. Ask who they received their mortgage from and if their experience has been good. If so, talk to the lenders that they work with and ask about their rates.[9]
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    Talk to your real estate agent. Your real estate agent should have experience with a variety of lenders. She might even have an in-house lender that can offer you a loan. If so that should not stop you from shopping around.[10]
    • Lenders might be willing to give better terms to you if you have been referred by a real estate agent because they will want that agent to continue sending them customers.
    • Be aware that a real estate agent might have a financial interest in referring you to their own in-house lender. Do not take for granted that this is the best option, even if your real estate agent suggests that it is.
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    Look for brick and mortar lenders online. Do a web search for local lenders. Talk to as many as you can to get a sense for what rates might be available to you. offers a searchable online database of mortgage lenders.
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    Look at online lenders. Many of these claim that they can offer lower prices because they don’t have to pay for a physical structure. Evidence does not suggest that this is true, but it is worth seeing what you can find. Be wary though. If the deal appears too good to be true, it likely is.[11]
    • Major online lenders include Quicken Loans, AmeriSave, and Nationstar.[12]
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    Find a mortgage broker. Mortgage brokers can shop around and finder you better rates than you might be able to find on your own. However, you will have to pay for your broker. It is also not necessarily the case that the broker has your best interests at heart.
    • Brokers have been known to secure deals that are in their own best interest, rather than yours. Be sure to ask multiple brokers for deals, to determine if yours is giving you the best available price.
    • You should also ask how your broker is compensated and determine if she is charging you too much.[13]
    • Ask to speak to two or three recent clients of the broker to see if they have given satisfactory service to other customers.[14]

Method 3
Sealing the Deal

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    Be suspicious. Remember that lenders and brokers are sales people. Even if they have ostensibly reputable credentials, they are still looking out for their own best interests. The only way to know what is best for you is to explore all of your options.[15]
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    Negotiate. Lenders will offer different rates to customers with the same credit score to earn an average fee for themselves. You should always try to negotiate for a lower rate, or, at least, fewer fees. Once you have an offer from one lender, use it to negotiate with other lenders for lower rates.
    • Be mindful that, if the lender has offered to lower or eliminate a fee, they have not also added or increased another fee.[16]
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    Obtain a lock-in. When you have a rate that you like, ask for a written lock-in. This will protect you from having your rate increased for a set period of time while your loan is processed.[17]

Sources and Citations

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Categories: Mortgages and Loans