For borrowers who want to refinance:
It’s important to make a wise financial decision when purchasing a home or utilizing your home equity. Therefore, it’s advisable to search for best mortgage lender available. To achieve this, consider exploring offers from a minimum of three lenders.
Make sure to compare mortgage rates along with other loan factors like fees, terms, closing time, online application availability, loan tracking, and customer service options. By taking the time to research and make a well-informed decision, you could potentially save thousands of dollars throughout the duration of your loan.
Best Mortgage Lenders
Lenders
Rating
Min. Credit Card
Min. down payement
620
5%
620
3%
620
3%
620
3%
Andrews Federal Credit Union
No review found!
NBKC
No review found!
guaranteed rate
No review found!
PNC
No review found!
PenFed
No review found!
How does a mortgage work?
A mortgage is a financial loan used to buy a house. The borrower pays back the loan with interest through monthly payments over a specific period, like 15, 20, or 30 years. Failure to repay the mortgage may result in the borrower losing their home through a legal process called foreclosure.
Banks, credit unions and other lenders offer mortgages. To apply, fill out an application and provide documentation about your finances. Lenders consider your income, debts and credit score to decide whether you qualify and the terms to offer.
Types of mortgages
There are a variety of mortgages and home loan programs. Here are some of your choices.
Fixed vs. adjustable rates
There are two types of mortgages: fixed-rate and adjustable-rate. In a fixed-rate mortgage, the interest rate remains unchanged throughout the entire loan term. On the other hand, an adjustable-rate mortgage (ARM) maintains a consistent interest rate for a specific period, typically up to 10 years, and then adjusts at regular intervals, usually every six months.
15-, 20- and 30-year mortgages
The 30-year mortgage term is the most commonly chosen option, although there are also 15- and 20-year mortgages available. Throughout the term, mortgage payments are made on a monthly basis. By the end of the term, the loan is fully paid off and the borrower becomes the proud owner of the property, with no remaining debts.
Government-backed mortgages
These loans are backed by the federal government:
FHA mortgage are supported by the Federal Housing Administration, enabling down payments as low as 3.5% and featuring more flexible credit score criteria compared to other loan options. Borrowers are required to cover the cost of mortgage insurance.
USDA home loans, supported by the U.S. Department of Agriculture and designed for rural home buyers, do not necessitate a down payment. However, borrowers are obligated to pay an initial and yearly guarantee fee, akin to mortgage insurance for FHA loans.
VA loans are specifically designed for veterans and active military members, backed by the U.S. Department of Veterans Affairs. These mortgages offer the benefit of no down payment requirement, although borrowers do need to pay a one-time VA funding fee, which can be included in the loan amount.
Conventional loans
Traditional loans are home loans that do not have the support of the federal government. While some traditional loans may only require a 3% down payment, borrowers usually need to get private mortgage insurance if they put down less than 20%.
Conventional loans are home loans that do not receive support from the federal government. While certain conventional loans allow for a down payment as low as 3%, it is important to note that borrowers usually need to pay for private mortgage insurance if they put down less than 20%.
Nonconforming loans do not adhere to the set limits and guidelines. For instance, jumbo loans are conventional mortgages that surpass the conforming loan limits. Moreover, they usually have more stringent approval criteria compared to other types of mortgages.
What’s the credit score needed for a home loan?
The credit score required to purchase a house varies based on the loan type and the lender. Typically, borrowers fall within the high 600s to 700s range. FHA loans are known for having more flexible credit score criteria.
How to compare mortgage rates
Feel free to compare the current mortgage rates to get an idea of what different lenders are offering. After that, you can request initial quotes online from various lenders by providing details like your location, loan term, purchase price, down payment amount, and other relevant factors.
In order to receive an accurate quote, it’s important to apply for preapproval. The lender will review your credit history and confirm details about your finances, including income, assets, and debts.
How to shop for a mortgage lender
Before you begin your search for a new home, it’s important to find the right mortgage lender. By getting preapproved for a mortgage, you’ll demonstrate to real estate agents and sellers that you’re a committed buyer. It’s a wise move to obtain preapproval and then request Loan Estimates from multiple lenders. These estimates will provide you with important information about the loan terms, monthly payments, and estimated closing costs. Armed with this knowledge, you can compare offers and select the most favorable deal.
Home equity loans and lines of credit
Homeowners looking to tap into their home equity without going through a refinance or sale have the option of taking out a second mortgage.
A home equity loan provides you with the opportunity to access cash by leveraging the value of your home. While you have the freedom to use the funds for any expenses, it is advisable for homeowners to invest in upgrades and repairs that enhance the value of their property. This loan is disbursed as a lump sum and can be repaid over a predetermined period.
A home equity line of credit, or HELOC, also offers cash but works more like a credit card, allowing a homeowner to withdraw funds multiple times, up to the limit of their credit line, during a specific period and then pay it back.
It is important to note that both home equity loans and home equity lines of credit use the home as collateral. Therefore, homeowners should be aware that failure to make payments could result in the loss of their home. To ensure the best deal, it is recommended to compare offers from multiple home equity lenders, just like with purchase loans.
Best Mortgage Lenders of March 2024
- Andrews Federal Credit Union: Best for first-time home buyers
- NBKC: Best for FHA and VA loans
Guaranteed - Rate: Best for first-time home buyers, jumbo loans and HELOCs
- PNC: Best for first-time buyers, FHA and jumbo loans, HELOCs
- PenFed: Best for VA loans
- Pennymac: Best for FHA and home equity loans
- Flagstar: Best for home loans overall
- Navy Federal: Best for VA and home equity loans
- Truist: Best for HELOCs
Alliant: Best for jumbo loans - Network Capital: Best for home equity loans
Frequently asked questions
The answer depends on your needs. Lenders vary by the types of loans and services they offer as well as their credit score minimums and other requirements for borrowers. The best mortgage lender is the one that offers the products you need, has requirements you can meet and charges the lowest mortgage rates and fees.
Some lenders post mortgage rates on their websites and include tools to see how much your rate might be. But those are just estimates. You’ll need to get preapproved for a mortgage to get a rate offer based on your credit score and other financial information.
Closing costs are the various fees and expenses you pay to finalize the mortgage. Closing costs typically run between about 2% and 5% of the loan amount. That means on a $300,000 home loan, you could pay $6,000 to $15,000 in closing costs.
Most state housing finance agencies offer first-time home buyer programs, which can include closing cost and down payment assistance. The assistance can come in the form of a grant, a forgivable loan or a deferred-payment loan. To qualify, you need to work with a lender approved by the state agency.