How to Choose a Mortgage Lender

One of NerdWallet’s top pieces of advice for home buyers is to compare three or more mortgage lenders. That’s because shopping around could save you some serious cash: a study from Freddie Mac found that in 2022, a buyer who got mortgage interest rate quotes from at least two lenders could have saved up to $600 a year. A buyer who went a bit further and got quotes from at least four lenders could have pocketed up to $1,200 annually.

But getting rate quotes from a few lenders feels like a big jump if you’re just starting your home buying journey. There are obvious options, like your current bank or the lender your real estate agent suggests, but are those your best choices? Searching online for mortgage lenders will yield tons of results, so how can you make your search more specific?

Here’s a way to shop smarter, not harder, with three rounds of cuts that can help you zero in on mortgage lenders that will meet your needs. You can work your way down sequentially, from least to most specific, or jump around. Unless a particular category isn’t giving you useful results, you shouldn’t need to use more than one option from each section.

Begin with a criterion that’ll let you make a major cut — we’ve got three in this section. One might jump out to you right away as the most relevant, or you might need to do some trial and error.

If you’ve done a little research and know what type of home loan you’re looking for, that may be an easy way in.

Skip this section if you’re looking for a conventional loan. By far the most common type of home loan, conventional loans are offered by virtually every lender. If you already know you want a conventional loan, scroll down and choose a different starting point.

Loans backed by the Federal Housing Housing Administration, or FHA loans are fairly common. Ditto VA loans, backed by the Department of Veterans Affairs. You can narrow the list by looking for lenders that focus on that loan type. Lots of mortgage lenders are FHA- or VA-approved, but not all lenders make lots of FHA or VA loans. On NerdWallet’s lender reviews, you can find charts that show what percentage of each major loan type lenders made last year.

If you’re looking for a more unusual type of loan, like an ITIN loan or a physician loan, that’s naturally going to limit your list of lenders. These loans are relatively uncommon, so you won’t see loan volume in our charts, but you can use more informal gauges. When you’re on lenders’ websites, look to see how much information they have about your desired loan. Is there a dedicated webpage or blog posts, or is it just named in a list? If you can see loan officers’ information, you can check whether any list your desired loan type as a specialty.

There are lots of different kinds of lenders that offer home loans. While each individual lender is different, you can make some generalizations — and if you know you want one type, you can focus on that kind of lender.

Nonbank lender. Companies that only offer mortgages or mortgage-related loans, like home equity loans, are called nonbank lenders. Nonbank lenders usually don’t have physical locations — you work with them online, via an app, or on the phone. Nonbank lenders you might have heard of include Rocket Mortgage and Better.

Banks. Traditional banks offer lots of types of services, including mortgages. Sometimes banks will offer home loan incentives if you’re already a customer. With a bank, you may also be able to talk to a loan officer in person, though banks generally will let you apply for a mortgage online, too. Banks that have large home lending arms include U.S. Bank and Bank of America.

Credit unions. Because of their size, and also because they tend to be local or regional, credit unions can sometimes be more flexible in lending and offer more personalized service than a larger lender. You usually have to be a member to get a mortgage through a credit union, but membership is generally easy to obtain. Examples of credit unions that offer home loans are PenFed and Navy Federal Credit Union.

One last way to quickly size up lenders: Think about what’s important to you. Do you have needs or characteristics that would make you want to get a certain loan type or work with a particular kind of lender?

For example, if your main source of income is freelance or contract work, or if you own your own business, you may want to look for lenders that work with self-employed borrowers. If you’re a first-time home buyer, a lender that offers home buyer education, down payment assistance or special loan terms for first-timers might fit the bill.

You could also search for lenders with your values or ethics top of mind. That might mean looking for Black-owned or Black-led lenders, or lenders that score well on environmental, social and governance (ESG) scales.

You don’t want to have to dig too deep for this stuff. Ideally, you’d want these qualities or loan types to be easy to learn about on a lender’s website or from reading reviews.

At this point, you’ve still got a lot of options. Let’s cut it down to size. You could choose one subcategory from this section, or work your way through all three.

Many lenders display sample mortgage rates online. These samples assume a certain type of borrower, down payment amount, location and so on, but that can be enough to give you an idea of how lenders stack up against each other.

Some lenders will let you personalize sample rates by plugging in info like your credit score band, how much you’re trying to borrow and your down payment amount. You won’t know the actual mortgage rate you’d be offered until you apply, but checking out sample rates and playing with lenders’ rate tools can give you an idea of how they compare.

Look at online reviews and forums. What do other borrowers say about this lender and what it’s like to apply with them online or go through the mortgage application process? Lenders will often post glowing customer reviews on their websites, but you can also look on sites like the Better Business Bureau to view customer complaints. Seeing how a lender responds to customer concerns can also be telling.

Some lenders boast incentives to encourage you to choose them. These can include extras like helping you make a same-as-cash offer, waiving private mortgage insurance or having a network of real estate agents. These kinds of perks could sweeten the deal for you, but be sure they’re things you’d actually use. For example, having a real estate agent network is convenient, but are you going to be able to choose your own agent or is one just going to be assigned to you? If a lender offers cash back at closing, make sure you understand what you’d need to do in order to qualify.

Hopefully you’ve now got a list that feels manageable. Maybe you aren’t down to three lenders, but you’ve at least narrowed it to 10 or so. (If you’re not there, you may want to go back and use another criterion to cut it down to size.) Now it’s time to take that list and come up with some finalists.

If you haven’t already done so, check out lender reviews — you’re looking for impartial, comprehensive lender reviews from real-live experts.

If you’ve got your list down to a small number and you’re ready to start house hunting, go ahead and apply for mortgage preapproval from those lenders. Mortgage preapproval is free and there’s no limit to how many lenders you apply with. It does involve a hard credit pull, but if you complete all your preapprovals within 30 or so days, credit bureaus should recognize that you’re shopping and only ding you once.

Applying for mortgage preapproval will give you an idea of how much you might be able to borrow and what rate you could be offered, and provide a test drive of what it would be like to work with that lender. And you’ll want a preapproval in hand anyway to show real estate agents and home sellers that you’re a qualified, serious buyer.

If this feels like a lot, that’s because it is. (And if you want to skip all this, working with a mortgage broker is an option. It can be a less hands-on process, which for some borrowers is a good thing.) But taking the time to find the right mortgage lender could help you get the best loan for you and save money, too.