Buying a home and getting a mortgage represents a long-term financial commitment, and the mortgage company you choose will impact this major life decision for years to come.
Look Beyond the Interest Rate
The rate matters, but it tells only part of the story. When evaluating mortgage companies, examine:
- Their loan product variety
- Financial stability and reputation
- Credit score requirements
- Down payment options
- Level of guidance throughout the complex homebuying process
A slightly higher rate from a lender who provides excellent service and the perfect loan type for your situation might save you more money and stress than the lowest-rate option.
Know Your Numbers First
Before contacting mortgage companies, understand your own financial picture. Use Experian, Equifax, and TransUnion to check your credit score and improve it if needed. Most lenders need at least 620, but the higher your score is, the better.
Afterwards, use the 28/36 rule to calculate if you can afford the property.
- Housing costs should not be more than 28% of your monthly gross income
- Total debt payments (including your mortgage) should stay below 36% of your income
This calculation leaves room for other expenses and savings. Remember that qualifying for a certain loan doesn’t mean you should borrow the entire approved amount. Find the balance between what lenders will give you and what fits comfortably in your budget.
Understand Mortgage Products
Mortgage companies offer various loan types, each designed for different situations:
- Conventional loans work for many buyers. Most require as little as 3% down.
- Government-backed loans include FHA, VA, and USDA. FHA loans accept lower credit scores, while VA loans serve veterans and active-duty military and USDA loans help rural homebuyers.
Jumbo loans finance high-value properties but come with stricter qualification requirements.
You’ll also choose between fixed-rate mortgages (consistent payments throughout the loan) or adjustable-rate mortgages (ARMs) with rates that change over time. The best fit depends on your circumstances, goals, and how long you plan to stay in the home.
Types of Mortgage Companies
Not all mortgage providers work the same way:
Direct lenders (banks, credit unions, online lenders) create and fund mortgages themselves. They offer competitive rates and consistent service from one loan officer.
Mortgage brokers match you with multiple lenders. They handle comparison shopping but charge a fee (typically 1-2% of the loan).
Portfolio lenders (often community banks and credit unions) hold your loan rather than selling it. This approach works well for self-employed buyers or those with irregular income.
Wholesale lenders work through brokers and may offer easier approval for borrowers with credit challenges.
Correspondent lenders originate loans but quickly sell them to larger institutions, sometimes resulting in unexpected servicer changes.
Hard money lenders provide short-term, property-based loans at higher rates. They focus more on the property’s value than your ability to repay.
Get Preapproved Before House Hunting
Prequalification gives you a rough estimate of what you might qualify for, while preapproval involves a deeper financial review. Getting preapproved:
- Shows sellers you’re serious
- Reveals your actual budget
- Identifies potential problems early
- Speeds up the final loan process once you find a home
Sellers and real estate agents prefer buyers with preapproval letters. This step puts you ahead when making offers and doing home inspections.
Understand the Paperwork
Within three days of applying, lenders must provide a Loan Estimate detailing terms, interest rate, and fees. This document helps you avoid surprises and compare offers accurately.
Later, at least three business days before closing, you’ll receive a Closing Disclosure with final costs. Review both documents carefully and ask questions about anything unclear.
Some lenders offer credits to reduce closing costs but compensate by charging higher interest rates. This approach lowers your upfront expenses but increases what you pay over time. Choose based on your financial priorities and how long you plan to keep the mortgage.
Consider Accessibility and Support
Mortgage questions arise throughout the process. Some companies offer only web forms and toll-free numbers, while others provide local offices with staff you can meet face-to-face.
Think about your communication preferences. Do you want a personal relationship with your lender or prefer handling everything digitally? Neither approach is inherently better, but matching the lender’s style to your needs improves your experience.
The Bottom Line
Choosing a mortgage company involves more than finding the lowest rate. The right lender offers the loan product that fits your situation, clear communication, competitive terms, and support throughout the process.
Research options, understand different loan types, and compare multiple lenders. Ask questions, read paperwork carefully, and consider both immediate costs and long-term implications. A mortgage represents one of your most significant financial commitments. It deserves your full attention. If you need a partner for one of life’s biggest purchases, consider working with a realtor to help smooth the process.
