How to Compare Lenders as a First-Time Home Buyer

As a first-time home buyer, it can seem overwhelming to find a mortgage lender that offers the right combination of convenience and low rates and fees. Confidently select the best lender for you with these tips.

Where to Get a Mortgage as a First-Time Home Buyer

It may be tempting to just go to the bank you keep your accounts with, but you’ll also want to compare other options so you know you’re getting the lowest possible rate and the best terms for your situation. Here is an overview of the types of mortgage lenders:

Type of lender About
Bank Banks offer banking, investment and lending products, including mortgages. You can choose to work with one of the big banks, such as Bank of America or Chase, or a community or regional bank in your area. With most banks, you can start the mortgage application process at a branch or online. If you are an existing customer, you may qualify for a reduced rate or reduced fees on your loan.
Box Similar to banks, credit unions are financial institutions, but you often need to meet membership requirements to join. For example, you may need to live in a specific region or work in a specific industry. Credit unions generally offer lower mortgage rates and more personalized service, but you may have limited loan options compared to a bank or non-bank lender.
Non-bank lender Sometimes referred to as independent or non-custodial institutions, non-bank lenders offer mortgages either exclusively or together with other types of loans. Many non-bank lenders operate online and tend to have fast turnaround times for pre-approvals and closings. Some don’t charge a fee either.
Broker A mortgage broker is not a lender, but rather an individual or business that connects borrowers with lenders. The broker compares several lenders and loan options on your behalf and advises you on the best option – a valuable service for first-time buyers, in particular. Usually, the lender pays the broker’s fee and then passes that cost on to you.
Market If you don’t know where to start when comparing lenders, an online tool like Bankrate can help you identify lenders and assess trends without having to jump from website to website. If you see a lender you like, many marketplaces also connect you directly to the lender for next steps.

How to Compare Lenders as a First-Time Home Buyer

When comparing mortgage lenders as a first-time home buyer, consider costs first:

Interest rate and APR

The interest rate is the rate at which your lender will charge you interest on your mortgage. The APR, which stands for annual percentage rate, includes the interest rate and other costs associated with the loan. The APR is always higher than the interest rate. Both percentages are listed on your loan estimate so you can easily compare costs between lenders.

Closing costs

Your closing cost tab may vary depending on the lender. Some lenders don’t charge origination fees, for example, or may waive or reduce the cost. Here is a list of common closing costs:

  • Mortgage origination fees
  • Points
  • Registration fees
  • Assessment fees
  • Credit check fees
  • Title search fees
  • Processing fee

Be on the lookout for extra or inflated fees. That’s why it’s important to compare at least two, and ideally three, lenders, so you get an idea of ​​what’s considered standard versus excessive.

Like the interest rate and APR, closing costs are detailed on your loan estimate – but on this document, they are only estimates, not final numbers.

Once you know the exact costs for your situation, you can start comparing other factors such as:

  • Does the lender participate in home ownership programs?
  • Will the lender work with you if your credit isn’t up to par?
  • Does the lender allow you to lock in your rate? If so, how long and how much does it cost?
  • Can the lender meet your closing deadline?
  • Is the lender easy to reach?
  • Does the lender answer all your questions satisfactorily?
  • What are past customers saying about their experience? (Check reviews from lenders.)
  • Are there any special benefits to working with the lender (eg, a free credit repair service or a down payment with a down payment)?
  • Does the lender offer refinancing or home equity products?

At the end of the line

With so many mortgage options, due diligence is essential. Take your time comparing at least three lenders – and different types – to find out their individual loan offers and rates. Once you’ve narrowed down your list, don’t feel pressured by the loan officer to get pre-approved. Ask questions about what you can expect from the experience. In the end, it’s best to go with whatever lender gives you what you need at the lowest possible rate.

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