There are many mortgage lenders to choose from. You should evaluate lenders on four key factors:
- Interest rates
- Closing costs
- Product offerings
- Customer satisfaction
Interest ratesLenders charge different interest rates, so by shopping around, you could find a better deal for your mortgage.
Interest rates are fairly consistent between lenders for fixed-rate mortgages, as lenders all base their rates on the national average and other factors. However, choosing a lender with a rate a few tenths of a percentage lower could still save you hundreds, potentially thousands, over the course of the loan.
There are more differences between lenders with adjustable-rate mortgages. Lenders customize these loans because they have more flexibility to increase rates later. You should spend more time comparing lenders for an adjustable-rate mortgage because you have a better chance of finding a better deal.
Closing costsWhen you factor in closing costs, including the application, appraisal and loan origination fees, the lender with the lowest interest rate may not offer the best deal. Compare closing costs between lenders, using the APR to find out how much you’d owe per year for a loan when you factor in every cost.
Product offeringsYour lender may offer different loan terms like 15-, 20- and 30-year mortgages with fixed or adjustable interest rates. There are many variations of adjustable-rate mortgages based on how often the rate can change and by how much, such as 3/1, 5/1 and 5/5. If you want an adjustable-rate mortgage, look for a lender with multiple options so you can find the right fit.
If you want a FHA, VA or USDA loan, find a lender that participates in that program.
You should use customer satisfaction reviews to research lender performance. Lenders that don’t treat their customers well might not be worth signing up with, even if they offer great loan rates. You’ll be working with your lender for years, so you want one that will treat you well and that won’t make mistakes.
Check the 2017 J.D. Power Primary Mortgage Origination Satisfaction Study, which asked customers to rate their satisfaction with mortgage lenders across seven areas: overall satisfaction, loan offerings, application/approval process, interaction, loan closing, onboarding and problem resolutions. For each category, J.D. Power gives a rating of between five (indicating the lender is “among the best”) and two.
Readers should also contact the Better Business Bureau to find out if a lender has any reviews or complaints from past borrowers.
“Customer service is the most important factor when you’re looking to apply for a loan,” says Sickler. “A mortgage is a pretty standard product. What sets the best lenders apart is that when problems come up, they’re going to give you the personal attention you need.”