Routing # 256078446
MORTGAGE KNOWLEDGE CENTER
PenFed Mortgage with Confidence
MORTGAGE
How to shop for a mortgage lender
What you'll learn: The process of choosing a mortgage lender, and questions to ask each lender.
EXPECTED READ TIME: 5 MINUTES
Published: January 26, 2024
Finding the perfect home is important, but shopping for a great mortgage lender should be at the top of your homebuying to-do list. You’re in it for the long haul when you purchase a home. Depending on your loan term, you may be making mortgage payments for up to 30 years, so it’s essential to find the best lender out there for your needs. The right lender will help get you into your dream home and can make all the difference in the homebuying process. Plus, they’ll continue to assist you well beyond the origination process — whether it’s finding ways to pay down your balance or providing refinancing options down the line.
In this article, we’ll go over everything you should consider when you’re looking for a mortgage lender to help you achieve the dream of homeownership.
Mortgage shopping
Similar to house hunting, shopping for a mortgage takes time and careful consideration. While there are a number of mortgage lenders available to choose from, it’s important to take your time researching them so you can best determine which one has what you’re looking for.
There’s more to lenders than their rates. Customer reviews, the types of mortgages you’re interested in, and referrals from friends and family can help you start to narrow down your choice. Not all lenders are loan servicers. Some lenders will service your loan themselves, while others may have another company service it. You can ask potential lenders whether or not they will be directly servicing your loan if they originate it.
It's vital to shorten your list of potential lenders before you apply for pre-approval. Mortgage applications require a hard inquiry on your credit, lowering it temporarily by up to 5 points. Though it is possible to apply to multiple mortgage lenders in a short window of time, too many inquiries can have a negative impact.
Types of lenders
First, you’ll want to consider the type of lender that may work best for you and whether they have the type of mortgage you need. For example, not every lender is approved to provide government-backed loans. If you’re a veteran seeking a VA loan or a first-time buyer interested in an FHA loan, you need to find a government-approved lender. However, if you’re looking for a conventional mortgage, there are more types of lenders that can offer that option.
Here’s a quick breakdown of the different types of mortgage lenders you may come across as you research:
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Credit Unions — non-profit institutions set up as cooperatives, as they are member-owned. Rather than having to make a profit for shareholders, credit unions are able to prioritize member savings and needs. Must become a member to qualify for a mortgage. |
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Banks — focused on making a profit for shareholders rather than centering member needs. Offer more physical locations and typically provide members with more advanced online account management. (However, it’s important to note that there are credit unions who offer strictly online services.) |
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Mortgage Brokers — an individual or company that offers home loans from multiple lenders. Rather than applying to different lenders, working with a mortgage broker means applying once and receiving multiple offers. |
Banks still fund a predominant amount of mortgages today; however, credit unions are a great resource for borrowers. Many credit unions require a membership to utilize their products and benefits, but becoming a member is more accessible than people realize. Some credit unions are online lenders too — meaning your application process can be handled via the internet rather than in-person.
Comparing lenders
Though we don’t recommend applying to multiple lenders at once, you can reach out to as many as you want for more information on their services, interest rates, and borrower requirements. Plus, you’ll be able to get insight into their customer service operations. Be sure to inquire whether the lender services loans themselves or if they have other companies servicing their loans.
Advice
It’s best to shop around and consider all of your mortgage lender options. The ultimate goal is to select a mortgage lender who can provide the best services for your unique needs and homebuying goals.
Asking lenders the right question prior to applying can set you up to make the best decision for you and your family.
Questions to ask
Here are some questions you can ask prospective lenders:
- What mortgage products and mortgage terms do you offer?
- Do you service the loans you originate?
- Which mortgage type may be best for me?
- What will my fees and payments be?
- What are your credit qualifications?
- Do you offer rate lock?
- Is there a prepayment penalty?
- Do you offer pre-approval or pre-qualification?
Choosing your lender
There are a variety of mortgage options on the market, and even more mortgage lenders for you to choose from. While it may be reassuring to know there are many routes to homeownership out there, the first step is narrowing down those options and selecting a mortgage lender best suited to meeting your needs.
Be sure to do your due diligence and take your time researching prospective lenders!
SIMILAR ARTICLES
What Are the Different Types of Mortgages?
There are several different types of mortgages depending on your situation, credit score, income, amount of money needed, and other factors. See which home loan is best for you.
What is a Pre-approval?
Ready to be viewed as a serious buyer? Learn what a pre-approval is, why you need one, and how to get it.
What Is a Pre-qualification?
Pre-qualification vs. pre-approval? Let's clarify the difference between these similar terms to help homebuyers gain a better understanding of both.
Home Buying Process Step-by-Step
In home buying, it's important to understand everything that's involved. Follow PenFed Credit Union's step-by-step process before you step into your new home.
Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.125 discount point, which equals 1.125 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 0.625 discount point, which equals 0.625 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Routing #256078446
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