How to Find the Right Mortgage Lender for Your Situation

Reader question: “I am planning to buy my first home soon. How do I find the right mortgage lender based on the kind of loan I need? What are the basic steps to finding a lender?”

It partly depends on the type of loan you need. You didn’t specify. For instance, if you want to use the Federal Housing Administration (FHA) program, you’ll need to find a mortgage lender that is approved to offer these types of loans. They have to be approved by the Department of Housing and Urban Development. The same goes for VA loans, USDA, and other “niche” products.

On the other hand, if you’re just looking for a plain-vanilla conventional home loan, you’ll have an easier time finding a mortgage lender.

For most people, finding the “right” lender means finding one that not only offers the loan product they seek, but will also offer them a favorable interest rate based on their qualifications. In order to find such a company, you’ll have to shop around and compare interest rates and fees.

10 Steps: How to Find the Right Mortgage Lender

Let’s get specific. Here are ten steps you can take to find the right mortgage lender for your particular situation:

  1. Determine what type of home loan you need (FHA, VA, conventional, jumbo, etc.).
  2. Determine your monthly housing budget, as well a ballpark loan amount.
  3. If you want to use the FHA program, visit the lender search tool on
  4. If you have a relationship with a bank or credit union, find out if they offer home loans.
  5. Check with local mortgage companies in your area (just Google it).
  6. Schedule an appointment to get pre-qualified or pre-approved for a loan.
  7. Review the loan estimate form provided by the lender (it’s required by law).
  8. Get at least three estimates from different lenders. See next section.
  9. Compare the interest rate, estimated closing costs, and terms of each loan.
  10. Choose the product (and lender) that best meets your financial needs.

Comparing Offers from Multiple Lenders

In order to find the right mortgage lender for you, you might have to apply with several of them to compare their offers. There are several things to consider as you do this. The interest rate is obviously important, but you should also review the terms of the loan, the estimated closing costs, and other factors that will affect the total cost.

As you try to find the right lender, don’t rule out small banks and credit unions. If you have an existing relationship with a local bank, for example, you might get more favorable terms by working with them. Many first-time home buyers think they have to use the big national banks, such as Wells Fargo and Citi. But this is not the case at all. You have plenty of choices! Use the mortgage lender you feel is giving you the best deal. Don’t be afraid to shop around for offers.

The Internet can also help you find the best mortgage lender, while saving you a lot of time along the way. There are quite a few lending websites that allow you to get offers from different lenders all at once. This is a good way to simplify the process of gathering quotes. Chances are, you’ve seen advertisements for these websites on TV.

Your Credit Score Will Survive

Mortgage shoppers are often concerned that their credit scores will suffer if they get too many quotes in a short period of time. While it’s true that each lender will check your credit reports and scores, it shouldn’t have a major impact on your overall score. The scoring systems are designed to recognize “rate shopping” as an acceptable form of consumer behavior.

According to MyFICO, the company that created the widely used FICO credit-scoring system:

“Hard [credit] inquiries … include credit checks when you’ve applied for an auto loan, mortgage or credit card. Each of these types of credit checks count as a single inquiry. One exception occurs when you are ‘rate shopping,’ which is a smart thing to do. Your FICO score considers all inquiries within a 45 period for a mortgage … as a single inquiry.”

The only way to find the right mortgage lender for you is to shop around and compare offers. Your credit score might fluctuate a bit as you do this. But it shouldn’t change dramatically. Rate comparison shopping is an important and essential step in the process. There’s no way around it, if you truly want to find the best deal.

Those are some of the strategies you can use to find the right lender for your particular needs. Remember, the only thing that matters in the long run is the overall cost of your home loan, as well as the terms. So by this definition, the right lender is the one that can save you the most money while giving you the kind of loan you need.