It’s not possible to say that any one lender, or type of lender, has the best rates all the time. Rates and policies are constantly changing, and creditworthiness plays a large role in what rate you qualify for. That said, it’s best to research the many options that are available before selecting the lender that will grant your mortgage.
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Online Mortgage Lenders
As a starting point, it’s easy to see the rates offered by dozens of online lenders. A great site to compare multiple quotes is LendingTree. In addition, here is a regularly updated list of mortgage companies and their current rates:
Other Home Loan Options
If you’d prefer to research mortgage rates the old-fashioned way, here are several options:
Your Credit Union
Before settling on a mortgage lender from any source, checking with a credit union is a good idea. You have to be a member of the credit union in order to get a mortgage (or any other type of loan or service) from them. But this can usually be accomplished by simply opening up a checking or savings account.
Credit unions typically have the lowest loan rates available. That’s because they are nonprofit organizations that are owned by their members. For that reason, their members get the best rates available.
The limitation of credit unions is that they are usually geographically-centered or industry-specific. For example, you may need to live in a certain county or group of counties in order to join a particular credit union. Or you may be required to work in a certain industry, for example, holding a job within the airline industry. That tends to narrow the field of potential unions you can join. Whether you’re a teacher, have served in the military, work in the medical field, went to a certain university, or support a particular cause, there is a high likelihood that a union exists for which you’re eligible.
You can use a site such as MyCreditUnion.gov to find the credit unions available in your area, and then determine what their mortgage rate offers are. If you find one with very good rates, apply to become a member and then apply for your loan.
Local banks can be excellent sources of mortgage money – or not. That’s because some local banks are committed to mortgage lending, while others keep it to an absolute minimum. But the more aggressive banks will be evidenced by the fact that they charge low rates and fees.
You’ll have to do some investigating to see which local banks are serious about getting business, and which ones have no serious interest. If you hold a checking or savings account with a local branch, this is your obvious starting point. If not, ask your friends and neighbors about the banks they use (bonus points if they’re willing to tell you whether that bank holds their mortgage and, if so, how their experience has been).
I worked for a mortgage broker for eight years, and I can tell you that this is one of the very best sources of mortgages available. That’s because while direct lenders, like banks, can only lend their own mortgage products, mortgage brokers work with multiple lenders and can take advantage of the best that any of them have at any given point.
This can save you the trouble of having to shop around, as mortgage brokers tend to work with the lenders who have the best rates. And when a certain lender no longer offers mortgages or great rates, they simply move on to another lender within their portfolio.
In addition, mortgage brokers also know which lenders are the most accommodating. This is important, because if a particular bank has stiff underwriting requirements, it won’t matter how low their pricing is, since it may not be possible to actually close a loan with them.
Mortgage brokers also tend to be on the hunt for new and more aggressive lenders on a continuous basis. This will give you the best chance of getting the best rates available in your market.
And one more thing about mortgage brokers – they don’t get paid until your loan closes. That gives the account executive a built-in incentive to work with you through the entire loan process. This will be like having an advocate working in your favor, one who is as anxious to close your loan as you are.
The NAMB is an excellent source for finding individual brokers in your areas.
The Big Nationwide Banks
Larger mega-banks, like Wells Fargo, CitiMortgage, and Bank of America, also merit investigation. However, never assume that a bank is the best source for a mortgage just because they are a household name.
Major banks become household names because of large advertising budgets. That can be reflected in their loan pricing. Since they are able to attract business based on their name recognition alone, they don’t necessarily have to offer the best rates.
Still, the big banks are worth at least checking out. One of them may be looking to expand their market share, offering some of the lowest mortgage rates available to draw in new customers.
Bankrate.com is something like having a mortgage broker, except that it is online. In effect, a Bankrate is a mortgage lender aggregator. That is, they provide a list of lenders in your area, including each lender’s rates, APR, points, closing fee, and projected monthly payment. What’s more, the list of lenders enables you to make comparisons between those lenders. That will make your choice much easier.
They also provide direct contact with each lender on the list, so you can just click through if you decide to go with a certain lender. The one thing that Bankrate doesn’t have in common with mortgage brokers is that you won’t have an account executive working with you to help you find the best lender, or to guide you through the process. But this is probably the next best thing.
LendingTree is another mortgage loan aggregator, much like Bankrate. According to the site, it has facilitated more than 55 million loan requests and accounts for $251 billion in closed loan transactions.
LendingTree has you complete a multipage application before it actually provides you with access to any lender information. There will be a series of questions asking you if you are buying or refinancing, your geographic location, if you’re working with a real estate agent, if you selected a property, the loan amount, how much you are putting down, if you need help with your move (add-on service), your credit score range, your date of birth, if you served in the military, your address, and contact information.
In the initial process, it’s obvious that LendingTree is gathering information for database purposes. Once you complete the initial questionnaire, you’ll be solicited by multiple lenders who will try to win your business. The competition aspect of this arrangement is solid – you are likely get a better deal when lenders are competing against one another.
What LendingTree does is to filter out the offers. You will receive a maximum of four offers, out of the 200 or so lenders they work with. This limits the offers just the ones that most closely fit your circumstances.
One caveat in regard to the online aggregators – Bankrate, LendingTree, or any other mortgage source – is that you should never assume that they represent the entire market. Rather, you should see them as an additional resource to help you find the best loan for your needs. It is entirely possible that the most aggressive mortgage lenders will not advertise on these websites, and you will miss out if you don’t do a full investigation of options.
The biggest online mortgage lender in the country, and the third largest mortgage lender of any type overall, is Quicken Loans. This includes its popular affiliate (or more particularly, its service portal), Rocket MortgageSM, which has been doing quite a bit of advertising.
Quicken Loans is perhaps the ultimate virtual mortgage lender. They have what every other direct mortgage lender has, but the process is entirely online. That means no face-to-face contact and human interaction only on an as-needed basis.
The process works best if you feel absolutely comfortable with the self-service model. Rocket MortgageSM does give you some control over the pricing of your loan. Primarily, this means that you can balance between the rate and points on the loan to come up with one (but not both) that work for you. This can include either a lower rate/higher points combination, or a higher rate/no point arrangement. (It’s really a machine-driven exercise that human lenders provide every day, at least on request.)
The service does streamline the cumbersome mortgage process to some degree. They are often able to verify employment and income online, sparing you the trouble of providing income documentation. It can do the same in verifying your bank accounts. Finally, they will let you know whether you qualify for the loan you are applying for in a matter of minutes.
Whether or not Quicken/Rocket MortgageSM will work for you largely depends on how comfortable are you with the online-only process. If you prefer the human touch in helping you to navigate the process, you’ll be better off going with a traditional lender.
We’re not endorsing any of the mortgage loan sources above in particular, but rather recommend that you do thorough search of the lenders available, so that you will get the best rate and terms possible.