Shopping for houses might be a lot of work, but it’s also a lot of fun. Shopping around for a home loan? Still a lot of work, and arguably not as enjoyable.
That said, the relationship between you and your mortgage lender may be a long-term one — most conventional mortgages have a term of 30 years. (The “term” refers to the life of the loan, or how long it’ll last if you don’t pay it off early.) Both the lender and the type of loan you choose to take out can have an impact on your interest rate, loan terms, required down payment, and other important financial factors, so it’s worth doing a little bit of browsing through your loan options before making a decision.
Fortunately, it doesn’t have to be too hard! Armed with the right questions to ask and the basic knowledge of where to go to find answers (and which answers you ideally want to hear), finding the right mortgage lender can be a breeze.
Here’s what you need to know.
Who offers mortgages?
It used to be common for would-be homebuyers to seek out the services of a mortgage broker, who would do the work of mortgage shopping for borrowers. While this is still an option, the commission the broker makes may add to your final closing costs — and besides, the magic of the internet has made it pretty easy to compare mortgage loan interest rates and terms without even leaving your home.
But before you can find the right mortgage, you have to know who offers mortgages in the first place. These days, you can find mortgage loans offered by banks, credit unions, online lenders, and even nonbank mortgage companies who specialize specifically in home loans. You can also find aggregator websites that allow you to view a spectrum of available mortgage rates and terms side-by-side, though your specific rate won’t be locked in until you’ve submitted a formal mortgage application with a specific lender, who will then go through the underwriting process.
What questions should I ask potential lenders?
Once you’ve got a few potential lenders to work with, you can start narrowing down the options by asking important questions (or seeking out the answers to those important questions on the lenders’ websites, where they may be answered).
Top-of-mind may be how low the lender’s interest rates go — because, of course, the higher the interest rate, the more you’ll pay in total over the lifetime of the loan. It’s also good to ask whether the lender offers fixed-rate mortgages — which involves a principal and interest payment that stays the same no matter what the market does (the monthly mortgage payment may still change due to escrows for taxes and insurance) — or adjustable-rate mortgages, whose rates and monthly payments can shift.
You’ll probably also want to learn the lowest possible down payment a lender will accept, which is often related to which types of mortgage programs the lender offers. (As we’ll touch on below, certain loan programs and loan products are specifically built to help first-time buyers find affordable mortgages.)
Additionally, if you’ve already submitted a loan application and gotten an estimate, you might ask your lender how, specifically, you could improve your standing to obtain a lower interest rate. For instance, paying down existing credit card debt can often do wonders for an applicant’s credit history, and refinancing existing debt, like your auto loan, might make it possible to pay it off more quickly. While it can feel like a lot of work to get your ducks in a row before taking on homeownership, doing so can help ensure you’ll find a competitive mortgage rate — saving you money in the long run.
What type of mortgage do I need as a first-time homebuyer?
Along with different lenders, there are also different types of mortgages on the market to consider — some of which offer special advantages for first-time homebuyers.
For example, while even conventional loans may require a down payment as low as 3% for first-time buyers these days, they often still have relatively high credit score requirements, and may be difficult for borrowers who are still building their credit history to qualify for.
Government-backed programs like FHA loans allow first-time homebuyers to put down as little as 3.5%, and borrowers can be approved with a credit score as low as 580 in some instances. If either you or your spouse is a veteran or active military member, you may be eligible for a VA loan, which doesn’t require any down payment (though you’ll still be on the hook for a funding fee of between 1.3% and 3.3% of the loan amount). You might also look into USDA loans, if you’re considering a home in a rural area. Additionally, assistance programs may be available in your area that can make saving up for a down payment a lot more achievable.
If you’re a buyer, first-time or otherwise, whose financial situation can make it difficult to qualify for traditional mortgages — for example, if you’re self-employed or a foreign national — Quontic Bank may be able to help. As one of only 3% of U.S. Banks with a CDFI, or Community Development Financial Institution, certification, we’re able to offer prime mortgages to non-traditional borrowers and other underbanked individuals. Our Community Development Loans, or CDLs1, are specifically designed to assess a borrower’s holistic financial history, rather than simply their credit score, as part of the pre-approval and eventual formal application process. We offer plenty of other mortgage products, as well, with low rates and affordable monthly mortgage payments to make homeownership more achievable. Many of these loans can also be used by current homeowners to refinance existing real estate.
Still have questions? we’re standing by to answer them!
1All lending products are subject to approval. Rates, program terms & conditions are subject to change without notice. Not all products are available in all states or for all amounts. This does not represent an offer to enter into a loan agreement. Other requirements, restrictions & limitations apply.
Information is accurate as of November 24, 2021 & is subject to change without notice.