How to Choose a Mortgage Lender

To choose a mortgage lender, confirm the company and loan officer are licensed for your state on NMLS Consumer Access, get official Loan Estimates from more than one lender for the same loan type, and compare them line by line. Then weigh the numbers against how clearly each lender answers your questions. The right fit is the lender whose offer and process you understand and trust, not the one with the loudest advertising.

Start with the type of loan, not the lender

Before you call anyone, get a rough idea of which loan types may fit you. Conventional, FHA, VA, USDA and jumbo loans each have different structures and requirements, and not every lender offers every type. If you are a veteran, you may want a lender experienced with VA loans. If you are buying in a rural area, you may want to ask about USDA. If your income comes from self-employment, ask how each lender documents that kind of income.

Knowing your likely loan type lets you ask for comparable quotes. A Loan Estimate for an FHA loan and one for a conventional loan are not apples to apples, so compare the same loan type across lenders whenever you can.

Check licensing on NMLS Consumer Access

Mortgage companies and the individual loan originators who work for them must be licensed or registered through the Nationwide Multistate Licensing System. NMLS Consumer Access is the free public search that lets you verify this. It takes only a few minutes.

• Search by the company name, the loan officer's name or an NMLS ID number. Loan officers and companies usually list their NMLS ID on emails, websites and business cards.
• Open the record and look at the state licenses or registrations section.
• Confirm the regulator listed matches the state where your property is located and that the license is active.
• Check that the license type fits what the company is doing for you, such as a lender or broker license for the company and a loan originator license for the individual.
• Note any regulatory actions shown on the record.

Your state's banking or financial services regulator can also confirm licensing and tell you about complaints or enforcement actions. If a person cannot give you an NMLS ID, or the record does not show a license for your state, keep looking.

Later, when you receive a Loan Estimate, page three lists the loan officer's name and NMLS ID. Make sure it matches the person you have been speaking with.

Request Loan Estimates from several lenders

A Loan Estimate is a standard three-page form that every lender must use. Once a lender has the basic information that makes up an application, it must send you a Loan Estimate within three business days. Because the form is the same everywhere, it is the most reliable tool for comparing offers.

Getting a Loan Estimate does not commit you to that lender, and it does not mean your loan is approved or denied. It shows the terms the lender expects to offer if you move forward. To make comparison fair, try to request estimates on the same day, for the same loan type, amount and property, with the same rate lock assumptions. Rates move, so estimates gathered days apart can differ for reasons that have nothing to do with the lender.

How to compare Loan Estimates

Put the estimates side by side and work through them section by section.

• Loan terms: Check that the loan amount, loan type, product and rate type match what you asked for. Note whether the rate can change and whether there is a prepayment penalty or balloon payment.
• Projected payments: Look at principal and interest plus escrowed items such as taxes, homeowners insurance and any mortgage insurance.
• Origination charges: These are the lender's own fees for application, underwriting and processing. Compare the totals rather than individual line names, since lenders label fees differently.
• Points and lender credits: Points raise your upfront cost to lower the rate. Lender credits lower your upfront cost in exchange for a higher rate. Ask whether each quote includes either one, and ask for a version without them so you can compare evenly.
• Services you cannot shop for: Third-party services the lender selects, such as the appraisal and credit report. Compare the combined total.
• Services you can shop for: Items like title services and the survey, where you may choose your own provider.
• Cash to close: The estimated amount you will need at closing, after your down payment, closing costs, deposits and credits.
• Comparisons section: Page three shows the annual percentage rate, or APR, which reflects the cost of the loan including certain fees, and the total interest percentage. These help you compare the overall cost of offers with different fee and rate combinations.

If something on one estimate looks very different from the others, ask the lender to explain it. A good loan officer will walk you through each figure.

Questions to ask each lender

Numbers are only part of the picture. How a lender communicates can tell you a lot about how your loan will go. Consider asking:

• Which loan types do you offer, and which might fit my situation?
• Are you the lender funding this loan, or will you broker it to another lender?
• What is included in your origination charges, and are there any fees not shown here?
• When can I lock my rate, how long does the lock last and what happens if closing is delayed?
• Does this quote include points or lender credits?
• What documents will you need, and who will be my contact during underwriting?
• What could cause my rate or costs to change before closing?
• Do you service your loans after closing, or are they usually transferred?
• How do you handle self-employment, gift funds or other parts of my situation?

Weigh service and reliability

Closing on time matters, especially on a purchase with a contract deadline. Ask how the lender handles appraisals, conditions and communication with your real estate agent and closing agent. Ask who you call when something comes up and how quickly they typically respond.

Reviews and recommendations can be helpful, but read them for patterns rather than single stories. A housing counselor approved by HUD can also help you think through offers at little or no cost.

Watch for red flags

• Pressure to sign documents or pay fees before you receive a Loan Estimate
• Reluctance to give an NMLS ID or a license that does not cover your state
• Promises of approval or a specific rate before your information has been reviewed
• Requests to leave information off your application or misstate income
• Fees that appear at closing without explanation compared to the estimate

Making the final choice

Once you have compared estimates and asked your questions, choose the lender whose overall offer and process make the most sense for you. Tell that lender you intend to proceed, and lock your rate when you are ready. You do not owe the other lenders anything for the estimates they provided.

Keep your Loan Estimate. Before closing, you will receive a Closing Disclosure at least three business days in advance, and you can compare it with the estimate to confirm the terms match what you chose. Loan terms and approval are always subject to credit approval and vary by borrower, property and investor.

Frequently asked questions

Next steps

• Mortgage Lenders
• Mortgage Companies

Sources

• Using NMLS Consumer Access (Connecticut Department of Banking)
• Loan Estimate explainer (CFPB)
• What is a Loan Estimate? (CFPB)
• Choosing a loan offer (CFPB)
• How does a mortgage loan officer or broker get paid? (CFPB)