How to choose a mortgage lender

There's a lot to consider when deciding which mortgage lender is right for you. After all, certain lenders offer lower rates than others or programs for specific groups of people.   

Before you start the home-shopping process, you should pre-apply with three to four lenders. These lenders will provide you with a letter outlining your tentative rate and terms. This helps you compare lenders, choose the best option for you, shop for homes, and submit offers. You'll then pick your mortgage from these offers. 

Here's how to narrow down your initial search and ultimately decide on your lender.

The first step in choosing a mortgage lender is to pre-apply with three to five lenders so you can compare rates and terms. You'll ultimately select your mortgage from these initial offers.

Here's what to consider when choosing which lenders.

Loan types

Get familiar with the different loan types available. 

Most lenders offer conforming, conventional mortgages — great for W-2 employees with a two-year steady work history, a 620 credit score or higher and at least a 5% down payment. 

Not all lenders offer other types of loans, though. If you have a non-traditional job, a less-than-perfect credit score, a low down payment, or you're part of a group with a special type of government-backed loan, you'll need to make sure the lenders you're applying to offer a loan that fits your background and needs. 

Common loans that don't fall into the conforming, conventional bucket include FHA, VA, USDA, jumbo , non-QM, and proprietary low-down-payment loans. If you're interested in any of these loans, be sure the lender you're applying with offers them. 

If you're looking for a lender that has many options, we love Guild Mortgage for its loan diversity — so if you need an uncommon loan, check out this lender. 

Customer service

If you care about a lender's customer service record, be sure to weigh it heavily. 

You'll want to look for: 

• The lender's Better Business Bureau rating 
• How the lender fares in J.D. Power customer satisfaction surveys (if it's a big enough lender to make the list)
• Reviews from customers on trusted sites like TrustPilot
• Information on customer service phone line hours, whether they offer an online chat or a place for you to go to talk to someone in person. For example, if you don't like to manage your money online, you should choose a lender that has retail locations near you.

Some of our picks for the best customer service include Rocket Mortgage and Bank of America — so if this is your main priority, start here. 

Affordability 

If affordability of rates and fees is your top priority, make sure to choose a lender that lists this information on its site and consistently offers below-average mortgage rates. 

For example, we love FourLeaf Credit Union and Better Mortgage for this reason – both lenders consistently offer below-average rates. 

It's difficult to compare lenders that aren't transparent about their rates, so you may decide to skip those lenders if you can't find more information. 

Time to close 

If moving into your house as soon as possible is important to you, choose lenders with fast closing times. The average closing time is 38, according to ICE Mortgage Monitor.

Lenders like Rate close on loans in nearly half the time. 

Standout features, discounts and specialized products

Look into whether you can get a discount or a specialized product from certain lenders. 

You may need a lender that offers a grant to cover closing costs. For example, Flagstar offers this service to qualifying customers. 

Or you may want to stick with your bank because it offers a great rate discount for existing customers, as Bank of America does. 

Online vs. in-person experience

Think about what you want your lending experience to be when deciding on a lender. 

If you prefer to manage your finances in person, you should limit your applications to lenders with retail locations near you. We love Chase Bank for its in-person service and it has more than 4,500 locations nationwide. 

If you'd rather handle your mortgage application and servicing online, you'll want to choose a lender with a great app and sleek tools. We prefer Rocket Mortgage for that. 

Once you've received your pre-approvals, the next step is to compare the rates and terms of each lender to determine which is best. 

Your pre-approval letter will include: 

• The amount you're preliminarily approved for 
• Your expected interest rate, closing costs and terms
• Your maximum debt-to-income ratio

You'll want to keep initial considerations, like customer service, in mind but the key factor at this stage is which lender offers the best rate. 

Also, it's important to decide how much mortgage you can afford, as you may get pre-approved for a loan that's too big for you to comfortably pay off. 

Our calculator below can help you figure this out. 

Why trust CNBC Select?

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed financial decisions. Every mortgage review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of home loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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