Comparing mortgage lenders: what you need to know

When you start your homebuying journey, talking with more than one lender can help you to determine the loan options and programs that best fit your unique situation and financial goals.

As you build your list of lenders, check if your current bank offers home loans. National banks like Wells Fargo often create exclusive offers for their existing customers. They may also offer unique loan products or incentives, such as low-down payment loans, closing cost incentives, and special homebuying programs for first-time homebuyers.

Still unsure about which lender to work with? Ask your personal network of friends and family for referrals.

As you start your research and obtain lender recommendations from your trusted network, your lender list is likely to include five common types of mortgage lenders: 

1. National banks
2. Regional and community banks
3. Credit unions
4. Mortgage brokers
5. Online-only mortgage lenders

While there may be universal federal guidelines for mortgage loans, lenders are unique. Some lenders only offer certain types of loans, some may offer varying services, and some may offer a suite of special first-time homebuyer programs or closing costs grants.

One way to evaluate your mortgage options and lender list is to understand the key differences between each type.

The industry standard for lender shopping recommends you talk with at least three lenders before you make your selection. This approach can help you determine the pros and cons of working with each lender so you can choose the one that best meets your needs.

When comparing lenders, it also helps to focus on four key areas: loans offered, special programs to help homebuyers, your estimated interest rate and annual percentage rate (APR) based on your loan choice and financial profile, and the origination fees you’re likely to incur when you submit a loan application.

Once you've evaluated lenders and narrowed down your list, you may be ready to submit a loan application. During this phase you will be assigned a loan officer who will answer your mortgage questions and explain what documentation and paperwork you'll need to provide. Your loan officer will also do a considerable amount of work behind the scenes to ensure your homebuying experience runs smoothly.

Tips to get the most from your relationship with your loan officer.

1. Engage your loan officer early. Add a loan officer to your team early in the process, even before you fall in love with a home. This will help avoid the disappointment of potentially not being able to secure the financing you need to afford that home.
2. Set your budget. Be upfront about the monthly mortgage payment you can confidently afford and the amount you have budgeted to cover your origination fees and closing costs. This will ensure your loan choices align with your financial goals.
3. Set your methods of communication. Tell your loan officer the best method and times to contact you. This will help ensure you submit the proper documents and respond to questions about these documents in a timely manner, which will avoid delays in securing a full loan approval.
4. Ask questions. Always review your Loan Estimate document and ask about any loan details you do not understand. Don't sign it until you’re confident you understand the answers to your questions. Understanding your loan details ensures a smoother transaction. 

When you engage with a mortgage lender as soon as you start your home search, you’re ensuring you have the most up-to-date information and details about your borrowing options and can confidently focus on homes that fit your budget and financial goals.