The process of how to find a mortgage lender and get preapproved for a loan consists of a series of important and sequential steps. By systematically working through these steps, you give yourself the best opportunity to get approved quickly for the loan that you want.
While you may not be concerned about heavily vetting the lender you choose to handle your loan, you should be. Choosing the lender for your mortgage is one of the most significant decisions you’ll make in the entire housing purchase process. Remember, you’ll be doing business with your lender for the next several decades.
Finding the best mortgage lenders
Mortgage lenders work for banks and financial institutions and are responsible for approving and disapproving loan applications for new home buyers. There’s a good chance that your upcoming home purchase will be one of the largest purchases you’ve ever made in your life. It is essential to have the right professional on your side to help you navigate through the process.
Finding the best lender involves finding an experienced professional who works with the loan specifics you’re looking for. You’ll want a lender who works with the type of loan you want, is able to approve the amount of the loan you’re looking for and is equipped to deal with borrowers matching your credit profile. A proper lender selection can make or break your home buying experience.
How to find a mortgage lender
1. Check your credit score prior to starting your search.
Before you begin your mortgage lender search, you need to make sure you have all your proverbial ducks in a row. One of the most important factors in determining whether you get approved or denied for a mortgage loan is your credit score. Your credit score helps prospective lenders determine your creditworthiness, how much they can lend you and what rate the lender can offer you. Utilize online services to look up your current score so you can have a better general idea of what you will or will not qualify for.
2. Ensure any errors in your report are corrected and dispute any mistakes.
While knowledge of your current credit score is important, ensuring that it’s accurate and paints your financial situation in the best light possible is what really matters. Credit reports have a bad history of having errors, mistakes and negative marks that don’t belong.
Take the time to review your report in its entirety to make sure all of the information is up to date and accurate. If you find discrepancies, work to get them corrected by contacting the company or institution responsible for the incorrect information. What may seem like a small discrepancy could have an immense impact on your total score and your ability to get preapproved for a mortgage loan.
3. Gather the necessary documents.
Before you begin lender shopping and applying for a mortgage loan, you’ll want to make sure you have all of your paperwork in one place. Doing so prior to starting your search will make for a much more seamless process. The most important documents you’ll need are tax returns, a copy of your credit report, bank, and asset statements, pay stubs (W2s, 1099s, etc.), photo ID and detailed renting or purchasing history. If anyone is gifting you money to help in the purchase, you’ll want written confirmation of the funds clearly stating it’s a gift — not a loan — and an explanation of the person’s relationship to you.
4. Compare the different types of loans available.
Once you’re all set on your end, it’s time to start looking at the loan options available. If you’re brand new to the process, you may be unaware that not all loans are created equally. You’ve got several different types of loans to choose from that each come with different terms, limits, pros and cons. Some of the most popular options include conventional, fixed-rate, interest-only, FHA (Federal Housing Administration), ARM (Adjustable Rate Mortgage) and VA loans.
5. Get recommendations from trusted sources.
Reaching out to industry experts and experienced buyers can shed a lot of light onto the process, including do’s and don’ts only learned through experience. Make sure, though, that the source of your recommendation can be trusted. Friends and family usually want what is best for us, but philanthropy has never been a good prerequisite for giving financial advice. Understand your source before you choose how heavily to weigh the recommendation.
6. Determine what’s most important to you.
Once you’ve collected adequate information about the options out there, it’s time to determine what is and what is not most important to you. Ensure you understand the difference between needs and wants in the process. Making a list on paper can be extremely helpful here. It’s impossible to find what you’re looking for if you don’t know exactly what you want. Get a fixed target in mind before shopping lenders.
7. Compare lenders based on the criteria you identified as most important.
After you’ve completed all six of the previous steps you should start looking at lenders. By saving this step until the end, you ensure you’re much more educated on the process. This protects you from making mistakes or misinterpreting information and opportunities that can be costly. During this step, find all the possible lenders that meet your criteria and start comparing them. Look at things like rates, terms, conditions, lender reputation, and anything else unique to your home-buying situation.
The bottom line
Buying a home can be an exciting time as long as you work hard to ensure everything goes smoothly. One of the most important decisions you’ll make is who you choose to handle your loan. Knowing how to find a mortgage lender is easy, but it’s up to you to put in the work to find the right match.