How To Choose a Mortgage Lender

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Published Oct. 5, 2022
Couple compares mortgages with laptop on counter.

If you’re planning to buy a house and need a loan, then you’ll need to find a mortgage lender that fits your needs. While there’s no shortage of mortgage lenders out there, they all offer loans with different terms, rates, fees, and experiences.

Here’s a game plan for narrowing down your choices and how to find the best mortgage lender for you.

Review Your Finances

Before reaching out to lenders, it’s good to assess your financial situation and understand what you can afford. More specifically, you’ll want to determine how much you can put toward a down payment and what’s a comfortable monthly mortgage payment.

You also will want to look at your credit score, which is an important factor in determining your eligibility for a loan and what interest rate lenders will offer to you. In general, the better your credit score, the lower the interest rate you’ll get.

Lenders also look at your debt-to-income ratio to see how much of your income is already committed to debts and how much of a monthly payment you can afford. Calculate your DTI ratio by adding up your monthly debt payments and dividing that number by your gross monthly income. Lenders will vary in their requirements, but many won’t want your DTI ratio to exceed 43%.

Get Mortgage Preapproval

Applying for preapproval from a lender can help give you an idea of what you’re able to afford. The preapproval letter will tell you how much money a lender expects you’ll qualify to borrow. Preapproval also shows real estate agents and sellers that you are serious about buying a home and have the ability to secure financing.

To preapprove you for a loan, your lender will review your financial situation. You’ll likely need to provide the following documents:

  • Personal identification.
  • Credit report.
  • Proof of income:
    • Pay stubs.
    • W-2s or 1099s.
    • Bank statements.
    • Tax returns.
  • List of debts.

Compare Mortgage Offers

Comparing offers from different lenders is a good way to make sure you’re getting the lowest interest rate and best overall deal. Remember there are different types of mortgage lenders to choose from.

After you apply for a mortgage, you’ll receive a three-page form called a loan estimate within three business days. The loan estimate contains important information about the mortgage that the lender is offering, including the estimated:

  • Interest rate.
  • Monthly payments.
  • Closing costs.
  • Taxes and insurance.

The loan estimate also will indicate the type of loan, the loan term, and whether your interest rate can change. All lenders are required to use a standardized loan estimate form, which makes it easier for you to compare loan offers from different lenders and decide which is right for you.

FAQ: Choosing a Mortgage Lender

Here are answers to some frequently asked questions about choosing a mortgage lender.

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**itsHome, a LMB Mortgage Services, Inc. company, is not acting as a lender or broker. The information provided by you to itsHome is not an application for a mortgage loan, nor is it used to pre-qualify you with any lender. If you are contacted by a lender or broker advertising within our network, your quoted rate may be higher depending on your property location, credit score, loan-to-value ratio, debt-to-income ratio, and/or other factors. itsHome does not offer its matching services in all states. This loan may not be available for all credit types, and not all service providers in the itsHome network offer this or other products with interest-only options. The information that we provide is from companies which itsHome and its partners may receive compensation. This compensation may influence the selection, appearance, and order of appearance on this site. The information provided by itsHome does not include all financial services companies or all of their available product and service offerings. We use cookies to track data and provide you with the best possible experience. By proceeding you consent to the use of these cookies. For more information, see our Privacy Policy.

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