When looking for a home mortgage, you should apply at a lender offering the best deal on interest rates and fees, and who has a reputable track record. Even a small improvement in the interest rate could mean thousands of dollars in savings over the life of the loan. Shop for the mortgage first and then focus on finding a home to buy.
Start your search by identifying well-established lenders with a track record for ethical business dealings and superior customer support. For local referrals, contact a government-certified housing counselor in your city. Counselors approved by the U.S. Department of Housing and Urban Development can provide you with a list of lenders offering good rates and service. Find a counselor near you by checking the HUD website (see Resources). Initial consultations are usually free, and many counseling agencies offer free workshops and classroom training on shopping for a mortgage and buying a home.
Banks and Credit Unions
Virtually all banks and most credit unions offer mortgage loans, and should be included on your list as your shop around. Credit unions, which exist to serve their members, might have more attractive interest rates than banks, which are focused on maximizing profits. Applying at a bank or credit union where you already have existing accounts could qualify you for a discount on your mortgage. Also, some people prefer dealing with a small credit union rather than a major commercial bank because they feel the customer service is more personal and attentive.
Dedicated mortgage loan companies are licensed to sell only home mortgage products. Unlike banks and credit unions, the mortgage companies cannot help you with a variety of banking services such as checking and savings accounts. The strict focus on mortgage loans means many mortgage companies are forced to offer competitive rates as they compete against other lenders. Mortgage companies can offer virtually any loan type of offered by banks and credit unions, including adjustable rate loans and fixed-interest rate loans.
Mortgage brokers serve as an intermediary between companies selling mortgages and customers looking to apply. Brokers earn a commission when they introduce a borrower to a lender and the borrower is approved for a loan. Brokers have relationships with lenders all over town and out of market as well. That makes a broker a good resource for finding a good place to go for a home mortgage. Some brokers specialize in finding loan sources for people with poor credit or who have been turned down by some lenders.