Whether you’re a first-time buyer or real estate investor, purchasing a new home is always challenging. Getting a mortgage can be stressful and complicated, what with all the rates, fees, and paperwork to worry about. Fortunately, this website contains guides and reviews to the best mortgage lenders in the business. We’ve found everything there is to know about the mortgage lending industry to save you the trouble.
The most common form of mortgage is a conventional mortgage. These types of home loans involve two parties: the borrower (you) and a lender. Most lenders require borrowers to make at least a 20% down payment to get a conventional mortgage, with some exceptions. For example, if you purchase a home for $300,000, your lender will require you to pay down at least $60,000 and loan you the remaining $240,000.
This is a government-backed loan administered by the Federal Housing Administration for buyers with poor credit or lack of funds for a 20% down payment. FHA loans come in two forms: 3.5% down payment for borrowers with credit of 580-619, or 10% down payment for borrowers with as low as 500-579 credit score. The one major catch of taking out an FHA loan is that you must purchase monthly private mortgage insurance (which you can stop paying once you reach 20% equity).
The VA loan is a government-backed loan administered by the Department of Veteran Affairs. Some lenders offer VA loans without any down payment. Like the FHA loan, monthly PMI is a condition of taking out a VA loan. The following people may apply for a VA loan: veterans who have served at least 90 consecutive days of active service in wartime or 181 days of active service in peacetime; members of the National Guard and Reserve who have served at least 6 years; and spouses of veterans who died in the line of duty or as a consequence of a service-related injury.
Other types of loans include:
- Jumbo loans: These are conventional home loans that exceed the FHA’s limit. The limits actually vary based on geographic region, typically around $300,000 to $424,000.
- USDA loans: Government-backed loans administered by the US Department of Agriculture. These are designed for people buying in rural areas. Like FHA and VA loans, they offer the option of buying with a down payment of less than 20%.
- Home Equity Loans: Often referred to as a second mortgage, these are loans that let you borrow money against your home equity. The most common type is the home equity loan, or HEL. Another type is the home equity line of credit, or HELOC, which is like a HEL except the borrower can withdraw money up to a pre-set credit limit.
- USDA loans: Government-backed loans administered by the US Department of Agriculture. These are designed for people buying in rural areas. Like FHA and VA loans, they offer the option of buying with a down payment of less than 20%.
- Home Equity Loans: Often referred to as a second mortgage, these are loans that let you borrow money against your home equity. The most common type is the home equity loan, or HEL. Another type is the home equity line of credit, or HELOC, which is like a HEL except the borrower can withdraw money up to a pre-set credit limit.
- Cash-out Refinance: This is a type of mortgage refinancing option that lets the borrower turn some of their home equity into cash. Because this option lets borrowers “cash out”, so to speak, cash-out refinance is often a viable option to a home equity loan.
This is the more popular of the two options, especially among first-time home buyers. Fixed-rate mortgages are mortgages with fixed rates for the entire duration of the loan. When you take a fixed-rate mortgage, you pay more in year one than you would if you took an adjustable-rate mortgage. However, your rate never increases (nor decreases), meaning you can plan exactly how much you’ll pay in monthly instalments across the life of the loan. Once you’re locked into a fixed rate, you’re protected when the Fed and the banks start raising rate.
Adjustable-rate mortgages, also known as ARMs or variable-rate mortgages, carry higher risk and higher reward than fixed rates. ARMs are always cheaper than fixed-rate mortgage in year one, but they carry the risk of higher interest rates in future years. ARMs have two components: the number of years your introductory rate applies; and the intervals at which rates get updated. Most lenders offer ARMs of 3/1, 5/1, 7/1, or 10/1. A 3/1 ARM refers to an ARM with a fixed rate for the first three years and a rate update every year after that. The shorter your fixed period, the better your introductory rate (and the riskier the loan). Because of their unpredictable nature, ARMs are best used by borrowers with high risk appetite or with the intention of paying off their mortgage quickly.
Pros
- Nation’s largest lender
- Quick application and closure
- Option of physical or online applications
Cons
- Rates aren’t always lowest
- No home equity loans
- Live chat only available in business hours
If you’re looking for an easy and comfortable loan, QuickLoans can help. Not only do QuickenLoans help ensure you get a mortgage that’s right for you to save time, but the platform ensures you are aware of your loans status 24/7 so you can keep track of what is required of you and what has already been done to avoid repeating steps that have already been completed, saving you time and confusion.
Pros
- Wide range of loan products
- Local agents in every part of the country
- Highly-rated mobile app
Cons
- No rates without lengthy application
- No low-down payments on conforming loans
Fairway Independent Mortgage Corporation is an independent mortgage lender serving borrowers in all 50 states and DC. It was founded in Wisconsin in 1996 and is now a major lender, with more than 3,000 loan agents and 400 branches nationwide. Fairway underwrote $40 billion in home loans in 2019, making it one of America’s largest independent mortgage lenders.
Pros
- Guaranteeing Competitive Rates
- Free rate-lock feature
- Best-rate guarantee
Cons
- Only in 43 states
- No live chat
Better.com is a direct lender with a simple online application that can be completed any time, any day of the week. Better.com aims to revolutionize the way Americans get a mortgage – after completing an application, you can access personalized rates, talk to a dedicated non-commissioned Mortgage Expert, generate custom loan estimates, and search for mortgage discounts in your area
Better has automated much of the mortgage process. This drastically reduces the cost to originate and allows Better to pass as much of those savings as possible onto the customer and invest in customer satisfaction. Better.com was recently named Best Mortgage Lender for Customer Service by Nerdwallet.
Last but not least, rates at Better.com are backed by the Better Price Guarantee, which promises that Better won’t just match a competing price, but beat it by $1,000.
Here are some of the things to look for when comparing lenders:
- APR: Your APR, or annual percentage rate, is the rate you pay each year based on interest rate plus lender fees. The lower the APR, the less interest you pay each year.
- Terms: Loan duration, or term, is just as important as APR. Most lenders offer terms between 10 and 30 years. The shorter the term, the higher your monthly payments but less you’ll pay in interest over the life of the loan. The longer your term, the lower your monthly payments but more you’ll pay your lender in the long run.
- Customer service: Customer service is always important, but even more so when we’re talking about six-figure deals. Always search for a lender that is transparent about rates and fees, open about the requirements, and won’t waste your time dragging out the application process. In the digital age, all the top lenders offer the option of applying for a mortgage and uploading documentation online.