Best Mortgage Companies
Before you go hunting for the house of your dreams (or at least the best house your budget can support), you must first do a thorough investigation of the best mortgage lenders. This is a crucial step because a mortgage is one of the most important long-term investments that most people make.
If you are going to be paying a mortgage for 15 to 30 years you will need to get the best mortgage rates you possibly can, which can be a challenge in an ever-changing market. More people over 50 have mortgage debt than in the past, which means it's more important than ever to choose a good mortgage company. I've given you a head start by taking a close look at the top 5 mortgage lenders.
Best Mortgage Lenders: What to Consider
With such a difficult decision, it makes sense to compare trusted mortgage lenders and use every tool at your disposal. When you are choosing the right mortgage lender there are several things to look at and you will want to find the right features that can help you find that information.
Fixed or Variable Rate?
First, you need to choose a mortgage with a fixed or a variable rate. Fixed rates mean that the amount of interest you pay is always the same while a variable rate can fluctuate with the market. If you are looking for a long-term mortgage, you will most likely want a fixed rate so you aren't caught by surprise. A variable rate can cause you to pay more than you anticipated if interest rates move up, but you could also pay less if interest rates unexpectedly fall.
The Size of Your Down Payment
You should also pay attention to the size of the down payment which can depend on the value of the property. If you are refinancing a mortgage you should expect to see higher interest rates than when you are purchasing for the first time.
If you are purchasing your first home, consider if you can manage to put at least 20% of the purchase price of the property down as a down payment. For a traditional mortgage, this would be ideal. If you can't afford to put 20% down, you may still qualify for a mortgage. However, you will also have to pay private mortgage insurance (PMI), which can cost you thousands of dollars extra over the life of your loan. However, as a first-time home buyer, you can secure an FHA loan and put as little down as 3.5% of the purchase price while avoiding costly insurance. If you do get stuck paying PMI on your mortgage, consider refinancing in the future.
If you are refinancing a mortgage you should expect to see higher interest rates than when you are purchasing for the first time.
Understanding the Best Mortgage Companies
The world of financing can be a bit overwhelming. In order to determine the best mortgage company for you there are some terms and loan types you should understand so that you can make an informed decision.
If you get approved for an interest-only loan, you pay only the interest portion of your mortgage installment every month, up to a predetermined number of months. For example, a lender may agree that you pay interest only on a 30-year $200,000 mortgage for 48 months, after which you would be obligated to remit monthly amounts that include both the principal sum and interest.
An interest-only loan may be suitable if you:
- Don't currently make a large amount of money but expect your income to rise significantly in the future
- Plan to invest the difference between a normal payment and an interest-only payment in a project or asset that would generate more revenue in the future
- Presently earn income that is infrequent or irregular, such as bonuses and commissions
You should keep in mind that interest-only loans are typically reserved for those with excellent credit scores - 740 or higher - and larger mortgage amounts such as with jumbo loans. Interest-only loan rates vary among providers in a way that can significantly impact your monthly payment amount. This means that it's important to compare mortgage lenders in order to make sure you're getting the best deal for your situation.
...a 15-year loan allows you to be debt-free sooner, therefore you save more on interest by opting for the shorter time frame.
15-Year vs. 30-Year Loans
My analysis showed that the amount of savings you can expect depends on the interest rate on both loans, but suffice it to say that a 15-year loan allows you to be debt-free sooner, therefore you save more on interest by opting for the shorter time frame. However, a 30-year loan is still a great option if you cannot afford the higher monthly payments that generally come with a 15-year loan.
Why Should I Consider a 15-Year Loan?
A 15-year loan is a suitable option in some cases, including the following:
- You are on the high end of the income spectrum and want to own your home before your children head to college
- You are already established in your career
- You're working toward being debt-free
15-year and 30-year aren't your only options for the best mortgage. U.S. News details several other possibilities which are worth investigating, such as 5/1 adjustable-rate and 20-year mortgages.
Penalties for Early Payoff
Before taking out a loan or refinancing your mortgage, talk to your prospective lender to learn more about prepayment options and penalties. You want to be able to take advantage of the best home loan rates currently available but not at the expense of a huge penalty for paying off your existing loan.
If your mortgage originated after 2013, your lender may be prohibited from charging you a prepayment penalty. This is due to federal regulations administered by the Consumer Financial Protection Bureau banning mortgage companies from collecting these penalties except in very specific cases.
Still, you want to ensure that this issue won't be a problem for you, particularly if you're attempting to refinance your home less than three years after taking out the original mortgage.
Loan-to-value (LTV) equals your loan amount divided by the fair market value of the property you want to buy. For example, if you want to buy a house valued at $500,000 and you request a mortgage amount of $400,000, specialists would say that your LTV is 80%, or $400,000 divided by $500,000. Lenders pay attention to the LTV ratio because it directly correlates to the risk they take in each mortgage.
If you have a high LTV, your bank may require that you take out mortgage insurance in order to lessen their risk. According to Investopedia, you will get the best home loan rates if you have a loan-to-value ratio lower than 80%. Talk to your creditor to understand the company's LTV policy and lending threshold.
The Top Mortgage Lenders Can Help You Get the Best Rates
The difference between good and bad mortgage rates could amount to thousands of dollars over the time it takes you to repay what you owe. Because of this, it is important to know what exactly determines your rates when you apply and what you can do to lower it.
How Does a Lender Determine My Mortgage Rate?
Your annual percentage rate depends on external factors, such as inflation, the state of the economy, trends in the real estate market, monetary policies that the Federal Reserve has set, and average mortgage rates charged by other lenders. Your APR also draws on your personal situation, specifically your creditworthiness and past borrowing patterns along with rates that lenders apply to other consumers with whom you share the same economic profile.
Would I Receive a Lower Rate if I Pay Points/Origination?
A lender considers points/origination as a form of interest - so, yes, you typically would receive a lower APR if you pay points during the closing process. Each point equals one percent of the mortgage amount, and you generally pay it upfront in exchange for a reduced interest rate during the life of your money.
Remember, though, that it means you must dole out more money at closing because you must include things like down payment and points/origination when writing your check or setting your wire transfer.
Should I Only Apply with a Lending Institution that Has the Lowest APR?
Lending institutions often engage in a race to the bottom when it comes to setting an alluring and affordable APR for prospective borrowers. But don't just look at the interest rate when shopping for a mortgage because a significantly reduced APR might imply higher costs in other areas, such as closing fees. These fees cover things as varied as paperwork preparation, title work, and appraisals.
Before applying for a mortgage, you should review each lender's entire financing proposal, not just one or two aspects. Taking a holistic approach will enable you to evaluate the pros and cons of each financing proposal and to determine why a specific proposal stacks up better against others.
What Does "Lock" Mean?
A rate lock means that your lender agrees to guarantee a mortgage's interest rate and points/origination for a specific number of days. If interest rates increase during the lock period, the lending institution still has an obligation to honor its contractual word and not raise your APR.
Is It Better to Lock or Float My Interest Rate?
It all comes down to gut feeling or, rather, an educated guess based on where you think interest rates are heading in the next two, three, or four weeks. Interest rates are subject to the vagaries of financial markets and the general economy, so nobody can tell you for sure whether interest rates will rise or fall during a specific period.
If you think interest rates will rise before you close, you may want to lock in. Otherwise, you are better off opting for a floating interest rate.
The Best Mortgage Lenders
Searching for the right mortgage company or loan servicer can be a tedious and time-consuming process when you consider all the factors listed above. When it comes to your mortgage, you want to take your time and carefully weigh all the pros and cons before making a final decision.
To help assist you in your search, I've reviewed some of the industry's top mortgage companies. Here's a brief summary of the top 5 choices.
Quicken Loans Mortgages Review
- Simple application process
- No hidden fees
- Innovative programs
- May charge an application fee
Quicken Loans is a direct lender offering a wide variety of mortgage and refinancing services to customers. The company offers a mortgage plan to suit anyone's needs whether you're looking for a home for your family or an investment or business property. They offer jumbo loans for expensive properties up to $3 million and FHA streamline loans for current FHA homeowners who wish to refinance.
Quicken Loans offers competitive rates that may vary based on your debt-to-income ratio along with a streamlined application process that allows you to close hassle-free.
- Streamlined application and approval process
- Loan progress monitoring
- No broker or upfront origination fees
- Competitive rates
- Range of
- Only available in limited areas
- No online application for purchase loans
- Loan servicing outsourced
Lenda is a San Francisco-based start-up founded in 2013. The online mortgage lender uses a high-tech, low-overhead business model. This means they keep their staffing and other operational costs as low as possible while maintaining a high level of customer service. This allows Lenda to offer some of the best home loan rates with fewer fees than associated with traditional mortgage companies. This is accomplished through a simple, clean, easy to use website interface which walks you through each step of the process.
Lenda started out offering only refinance loans. You can now apply for a purchase mortgage as well with this company, however that option is not available online - you must call the phone number and speak to a representative. If you are, however, looking to refinance, Lenda makes it just about as simple as could be. As long as you meet their eligibility requirements, which are geared toward those with a solid credit score (minimum 640) and a secure financial position, you can receive approval in just an hour as opposed to days. After that, the company claims the process is faster than with traditional mortgage lenders, however regulations dictate much of the process, meaning it can still take around a month to get to closing.
One major drawback with Lenda is that they only service California, Washington, and Oregon at this point. The company plans to roll out into other states, however there is no estimation of when that might happen. If you do reside in those states, however, you'll enjoy the website's handy mortgage calculator as well as the ability to check in on your loan's progress at any time of day or night.
So far in their short history, Lenda is proving to be one of the best online mortgage lenders for those in their service area. Their simplicity and cutting edge, up-and-coming business model earn them a spot on my list of the top mortgage companies.
Sindeo Mortgages Review
- Wide variety of loan programs
- Dedicated mortgage advisors
- Excellent data encryptions
- Only for residential properties
Sindeo is a paid mortgage originator with access to more than 40 different lenders and over 1,000 different loan programs. While they are only licensed to help provide loan in 10 U.S. states, their reach is steadily growing as they increase their coverage area. In addition, they specialize in offering a personalized and unbiased process. They have access to specialty financing solutions to help borrowers in various different situations and customers receive a dedicated mortgage advisor to help walk them through the process and answer any questions.
Since Sindeo's mortgage advisors are not paid by commission and are compensated based on a guaranteed salary and customer satisfaction, they're able to provide authentic and unbiased advice and guidance that can help homeowners save an average of $20,000 over the life of their loan.
Sebonic Financial Mortgages Review
- Free rate quotes
- Privacy protection
- Dedicated loan expert
- Good customer service
- Website not as informative as others
Sebonic is licensed to provide mortgage loans in every state except Massachusetts. The company offers FHA loans and mortgage refinancing in addition to conventional loans. They also claim on their website to provide free rate quotes and low-cost services thanks to their unique approach and application technology.
Customers work one-on-one with a loan consultant to move swiftly through the application process and upload necessary documents securely online. This company makes my list of the best mortgage companies due to its broad geographical availability and personalized service model.
LoanDepot Mortgages Review
- Available in all 50 states
- Good customer service with live chat
- Lifetime guarantee
- Origination fee
loanDepot is another leading mortgage provider that has grown exponentially since the company's inception in 2010. loanDepot offers many different mortgage options along with money-saving refinancing options like HARP loans that save homeowners an average of $355 per month. They provide adjustable-rate mortgages for homebuyers who plan on selling their homes in a few years and would like to enjoy lower payments during their short-term stay.
loanDepot is licensed in all 50 states and offers a Lifetime Guarantee that helps waive the cost of an appraisal and other closing costs when refinancing. The guarantee is available to customers who obtained their initial mortgage through loanDepot and refinance it at least once.
Compare Mortgage Rates Quickly
Short on time? Check out our mortgage provider comparison tool so you can quickly compare the pros and cons of different providers in order to rule out the ones that don't appeal to you and narrow down the ones that do. If you've worked with a particular company in the past to obtain your mortgage or refinance, feel free to leave a customer review detailing your experience in order to help assist other potential and current homebuyers in their process.
Advice for Finding the Top Mortgage Companies
Still need some more advice about mortgage providers and different types of mortgages in general? Check out our advice column so you can learn important factors that play into obtaining a mortgage and how to pay yours off.
Our experts have created helpful guides including how to work on your credit before obtaining a mortgage, what you need to know before closing, and everything you need to know about property appraisal.
One thing that lenders may not tell you is how you can get approved quickly and the first time without having to obtain several hard inquiries on your credit. Before you apply for a mortgage, it's best to repair your credit and maintain it by paying down as much debt as you can, avoiding financing anything new, and preparing certain personal documents ahead of time to stay organized and speed up the initial application process.
Our experts also discuss how to build equity in your new home with a 15-year mortgage along with the pros and cons of having one.
It's important to take advantage of free expert advice and learn everything you can about mortgages before you seek out a loan provider to work with. We encourage you to view our other mortgage advice articles for well-rounded helpful tips and insight to enhance your experience from the application stage through the closing process.
Best Mortgage Companies Recap
The main point is becoming prepared and knowledgeable about the industry and your needs. Owning a home can be a dream come true, but it all starts with a great mortgage experience.
First, narrow down what you are looking for and what your needs are by considering all the factors that go into a typical mortgage. Then, you'll want to assess your situation and your means by comparing loan options and seeking out more information about the top contenders. Be sure to utilize our detailed reviews and comparison tool to weigh the pros and cons between each provider.
If you're shopping specifically for a refinance, don't forget to check out the best mortgage refinance rates. The best home loans typically require a decent credit rating. If yours needs cleaning up, you may want to consult one of the best credit repair companies before applying. Doing your research may sound like a big task to take on now, but it will pay off and most likely save you money on your mortgage in the long run.
Best Mortgage Lenders FAQs
What credit score do you need to qualify for a conventional home loan?
Typically, you need a credit score of at least 640 to qualify for a conventional home loan. People with scores above 740 are typically offered the best interest rates and mortgage terms. Loan programs such as Federal Housing Administration (FHA) loans are designed to help people with scores lower than 640 get a mortgage.
Who has the best mortgage loans?
The lenders that offer the best mortgage loans differ depending on the type of loan you are looking for. Some lenders are best for refinancing your loans. They include Chase and Lenda. Some lenders have a reputation for helping out first time home buyers, such as Quicken Loans and Wells Fargo.
What is a lender?
A lender is simply the institution or organization that makes a loan to a person or business. A lender can be a bank or other financial institution. In some cases, it can be an individual. It shouldn't be confused with a mortgage broker, who is the go-between who works with both the borrower and the lender.
What is Rocket Mortgage?
Rocket Mortgage is an online lender that aims to simplify and speed up the mortgage lending process. The company is owned by Quicken Loans. It offers both conventional mortgages and mortgage refinances. Part of the company's claim to fame is that is lets people know if they are approved for a loan or not in mere minutes.
Can I get pre-approved for a mortgage before finding and buying a property?
Yes, you can apply for a mortgage loan before finding a house to buy. In fact, mortgage advisers generally recommend that route because it gives you and the lender more time to process the application so that funds are ready when you settle on your dream home. When you apply beforehand, the creditor typically gives you a pre-qualification letter that you can show to real estate brokers. That way, they can see that you have done your homework in advance and are prepared to fork over the money as soon as they find the right property.
In one sentence, being pre-qualified for a loan adds more weight to your property search and lends credibility to your case when you talk to sellers.
Do lenders charge a fee if I file my mortgage application online?
There are three distinct types of mortgage application fees. The primary mortgage application fee varies depending on the institution you work with but my reach rates up to $500 and is strictly enforced for working with the mortgagee. To the best of your ability try to determine if you'll be approved ahead of time because this fee may not be refundable. The property appraisal and credit report fee are the remaining two charges. A lender may charge a small fee-usually $10 or $15-to pay for your credit report. However, it is not uncommon to see a potential creditor waiving the fee. The benefit of filing online is that it removes human involvement in the initial process, so the lender does not incur administrative expenses.
What does a lender need to process my loan?
A mortgage lender typically needs things like your most recent W-2 form, bank statements, and social security number along with your address and other bio data-such as first name, last name, and date of birth. Most lenders have an effective underwriting system that cross-checks data you submit with information contained in other public or semi-public databases. For instance, they may check with databases such as those maintained by credit bureaus like Experian, Equifax, and TransUnion. The verification process can go even faster if you already have an account with the institution at which you are applying for a mortgage loan.
What type of income does a lender consider when evaluating my application?
A lender would consider as part of your income your regular earnings along with bonuses, overtime, and commissions that you regularly receive. In other words, any item that is not recurrent would be excluded because the creditor wants to see a historical pattern in your income before considering it during the application review process. Windfalls or other one-time events that leave you with extra cash typically wouldn't be taken into account. The lender may ask you to provide things like W-2s, recent pay stubs, and tax returns for the last two or three years, so that your earnings, and their historical pattern, can be verified.
What are differences between a home equity loan and a home equity line of credit?
Both home equity loans and home equity lines of credit use your home as collateral. However, the home equity line of credit is accessible to draw upon over a long term while a home equity loan disburses all funds at once. Home equity lines of credit are revolving loans that allow you to borrow when you need it. A home equity line of credit loan has a variable interest rate while a home equity loan's interest is set at a fixed rate.
What are the typical types of mortgages?
Fixed and adjustable rate mortgages are the most common home-lending instruments. Fixed-rate mortgages feature regular monthly payments which are made over a specific term. Adjustable-rate-mortgages (ARM) offer the borrower a lower initial interest rate with payments that are generally lower than standard fixed-rate mortgages. They are ideal for buyers who don't expect to stay in their home for a long time. Fixed rate mortgages are considered safe and stable and are convenient for budgeting because the payments are always the same.
What is an FHA mortgage?
FHA loans are insured by the Federal Housing Agency, a division of the U.S. Housing and Urban Development (HUD). Borrowers who obtain FHA loans must purchase mortgage insurance to protect lenders against losses incurred from home mortgage defaults. FHA loans are an excellent option for first-time buyers because they can offer low down payments and closing costs. Home buyers must qualify for FHA loans by meeting specific guidelines based on debt-to-income ratios. While the FHA insures the mortgage, it is not a lender. Therefore, borrowers are required to obtain their loans through an FHA-approved lender.
What is an escrow account?
An escrow account is a separate account that holds extra funds from the borrower in order to pay bills such as homeowner's insurance and property taxes. The amount added into the escrow account each month equals 1/12th the yearly total of these bills. The lender collects the funds to be deposited into the account each month along with your monthly payment and then pays the property tax and insurance bills when they come due. For some loans, escrow accounts are a requirement.
What is a VA Loan?
A VA loan is a flexible, government-backed loan available since 1944 to veterans and their surviving spouses (unless the surviving spouse remarries). VA loans are issued by approved lenders such as the Veterans United Home Loans. They are guaranteed by the federal government. VA loans feature attractive benefits such as no down payment or mortgage insurance requirements. VA loans also offer competitive mortgage rates.
What is Private Mortgage Insurance?
Private mortgage insurance (PMI) is a type of mortgage insurance that protects the lender of conventional loans if the borrower stops making loan payments. The lender makes the arrangements with a private insurance company to obtain the PMI. In most cases, PMI will be required if a borrower makes a down payment that is less than 20% of the loan.