Are you looking to buy your first house, move home or add to your property portfolio? Let us help you to explore some of the industry’s best mortgage lenders.
Buying a house is probably one of the most exciting investments you can make during your lifetime, but as you already know, buying a house entails more than just choosing your new neighborhood and wallpaper designs. Unless paying cash, you will need to choose a mortgage lender, and this means disclosing information about your job, income, assets and spending habits.
Searching for a mortgage lender can be quite overwhelming, as they are so many in the market. In this article we review the types of mortgages available and compare the best US mortgage lenders while examining their pros and cons, to make your move as easy as possible.
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What Type of Mortgage do you need?
There are several types of mortgage for you to consider based upon your plans or circumstances. Understanding the difference will help you select a suitable lender and save you time further down the line.
1. Are you looking to buy your first house?
Being eligible as a first-time buyer doesn’t imply that you have never owned a home or property. You are typically regarded/ eligible to apply for a mortgage as a first-time buyer if you have not owned a home in the past three years.
Being eligible as a first-time buyer unlocks numerous benefits, including down payment assistance, low or no down payment mortgages and more.
SoFi Mortgage is one of the best mortgages for first-time buyers; this is thanks to the lender’s flexible loan options, fast approval and lack of a minimum FICO score.
2. Do You Want to Remortgage?
Regularly evaluating your mortgage might save a lot of dollars. However, you might find it hard or even impossible to qualify for a remortgage as a lot of new mortgages are usually offered on a fixed or even a discounted rate deal for a set period of time making them more affordable.
If you’re seeking to remortgage, then Quicken Loans should be at the top of your list due to their ample loan offerings. As a borrower, you can get virtually any sort of remortgaging loan suited for your individual needs.
3. Are You Applying for a Joint Mortgage?
Buying a home is a big financial step for most people. Luckily, you often don’t have to go through the process all by yourself as you can easily buy a home with a partner, whether a sibling, spouse or business partner. A joint mortgage helps you get access to better mortgage rates and terms and being joint applications can also boost your eligibility status.
If you’re looking for a joint mortgage, then Lenda should be your go-to lender. The lender offers flexible mortgage loans and you can be sure to find a joint mortgage deal that suits your needs.
How to Choose the Best Type of Mortgage
For you to choose the best mortgage lender, you should consider the following factors first:
- Amount you can borrow – The mortgage lender will mostly lend you between 4 and 5 times your annual personal income. Every lender uses different criteria for the maximum loan amount you can get. You need to think about how much you want to pay monthly on your loan. If your monthly repayments are more than 30 percent of your take-home income, this can become quite restraining and cause monetary issues further down the line.
- Required deposit – In the United States, the average required deposit is 20%. The higher the deposit you put down, the more desirable to mortgage lenders you will be and it’s likely that your interest rates will be lower too.
- Evaluate mortgage fees – At times, the mortgages with the lowest rates will come along with some hefty fees attached. So if you are intending to remortgage every two years to a brand new fixed-rate mortgage deal, your fees can add up, so before settling on a mortgage, do some maths and ensure the deal is still favorable after you add the fees.
- Mortgage repayments – A majority of fixed and discounted loans will let you make overpayments of up to 10 percent of the outstanding balance every year. This implies that you will pay off your loan sooner, which in turn saves you a couple of thousands of dollars in interest payments. However, you need to pay attention to early repayment penalties, if your chosen mortgage has any.
- Variable or fixed rate – For a fixed-rate mortgage loan, your monthly repayments remain constant for the duration of the loan, so you won’t get any benefits if interest rates drop, but the rate can’t increase either. If you sign up for a variable-rate loan, which includes tracker and discount mortgages, the monthly costs can rise and drop, following changes to interest rates.
- Repayment or interest-only – A repayment mortgage will require you to pay the interest on your mortgage and repay some of the principal debt monthly. At first, you pay more interest but as the loan term progresses, you increasingly repay the principal until you’re done with the mortgage repayment. On the other hand, an interest-only mortgage means making monthly repayments to cover the interest.
- Closing costs – When you consider closing costs, including the origination, application and appraisal fees, the mortgage lender with the least rate might not offer the best deal. Check the closing costs between lenders and find out how much you’ll owe each year.
What Influences Your Eligibility for a Mortgage?
Are you ready to buy a property or still in the planning stages of a property purchase? Either way, it’s important to understand what banks and lending institutions consider when they evaluate your mortgage application.
Lenders need to ensure that you’re likely to repay a mortgage according to the terms of your loan agreement. In making this assessment, the lenders consider several factors, which are not only related to your past and present financial situation but also other lending criteria.
1. Debt-To-Income Ratio
As a homebuyer, you`ll likely borrow a lot of money when taking out a mortgage loan. As such, a lender will need to evaluate any existing loans and your capability to keep up with the repayments before it can approve you for a loan. Things like your student loan among other debts will be taken into account when the lender evaluates your debt-to-income ratio.
Different lenders have varying requirements in terms of debt-to-income (DTI) ratios,but usually, lenders avoid lending mortgages to individuals with DTIs going past 43%. This is because they need to ensure that you can manage all your monthly payments without overextending yourself.
To keep a low DTI, ensure that you work on clearing off any large debts before applying for the mortgage.
2. Your Credit History
Reviewing your credit score and credit history can give a mortgage lender a view of how you manage your cash and the likelihood that you can pay back the loan. A mortgage lender will look at your FICO credit score and other scores that the lender might require you to have.
Before you submit your application, review first your credit report. Identify any mistakes in the report that could lower the score. Your credit score can have an impact on a variety of things including the interest rate.
3. Your Down Payment
A mortgage lender will need you to put some money down on a property so you have some equity in the property. This is what the lender uses as protection because the lenders want to recoup all the money they loan you in case you fail to repay.
Industry-standard dictates that homebuyers seeking to get conventional mortgages put down a minimum of 20% of their mortgage amount. Make sure that you only make a down payment that fits your budget and doesn’t cause you any additional debts.
4. Your Work History
All mortgage lenders, whether for a VA loan, FHA loan or a conventional mortgage, will need you to provide proof of employment.
Typically, they want to check whether you’ve worked for a minimum of two years and have a steady income. If you don’t have an employer, you`ll have to show proof of income from other sources.
5. The Condition and Value of the Property
A lender will want to check whether the property or home you intend to buy is in good condition before approving you for a loan.
In order to do so, property inspection or home appraisal is usually needed to ensure the lender isn’t offering you money to enter into a bad property deal.
6. Type of Loan You Want to Get
You should discuss different loan options with your lender to check the type of loans you are eligible for. You may not be eligible for a conventional mortgage loan if you don`t meet certain criteria. Even if you are eligible for a standard mortgage loan, the lender may not always offer you the mortgage amount you need depending on your circumstances.
Different kinds of mortgages come with varying requirements so before reaching out to a lender, it’s vital to check the requirements for several kinds of mortgage loans in case you fail to secure the kind of loan you had set your heart on.
- Ensure your credit score looks good - Maintaining high credit scores can translate to decreased mortgage rates, which means lower monthly payments.
- Seek the guidance of a financial advisor - This will help you factor how purchasing a property can fit into your bigger financial plan as ideally buying a house won't mean giving up on other financial goals you've set for yourself.
- Know the specific requirements - Mortgage lenders differ. This is why you need to research in advance what different lenders will require from you so that you can put your best foot forward. Be as honest as you can when working with your lender if you need approval for a loan as giving false information won’t make your situation any better and it can also come back to haunt you should you get stuck with a loan you can’t afford to pay.
The Best Mortgage Lenders in 2021
1. New American Funding | Best for self-employed individuals
New American Funding is a family-owned lender boasting flexible options as well as a variety of mortgage deals. It offers a simple mortgage application process and a selection of mortgage options. However, you’ll be required to ask for a quote via phone instead of doing it instantly online.
New American Funding offers a variety of mortgage types such as:
- USDA – This is available for $0 down to eligible homebuyers in rural areas. VA – This is available with $0 down to eligible military service veterans, members as well as select spouses.
- FHA – This loan is designed for low to moderate-income mortgage borrowers and backed by FHA. The loan is available to eligible homebuyers with at least as 3.5% deposit.
- Refinance – For those already with a mortgage, New American Funding can allow you refinance under a new interest rate as well as a different term length.
The lender requires at least a 620 credit score for a conventional mortgage. The minimum credit score needed for other types of mortgages offered by this lender varies based on the loan you acquire. The lender`s maximum debt-to-income ratio required for a mortgage is 28 percent. Expect your mortgage loan to include title charges, appraisal fees and closing fees which include processing fees, administrative fees, broker fees, rate-lock fees and courier fees. The lender does not usually disclose the actual loan costs but does include a refinance and mortgage calculation on the official website.
If you have a bad credit score or self-employed then New American Funding could be a good option for you. The reason for that is that they check all applications manually so that they can consider other crucial factors like having a significant amount of savings and high income. A lot of other US lenders use computer algorithms to determine the result of your application, but that`s not the case with New American. This means that your chances of securing a mortgage with them could be higher.
- Online flexibility
- Manual underwriting
- Free calculators and tools
- Undisclosed fees
- Lacks online preapproval/automatic quote
2. LoanDepot | Best for refinances
If you need to refinance, then LoanDepot should be your top choice. It makes your refinancing process pretty simple and straightforward as it can be and includes a variety of mortgage options. The brand has funded over $70 billion refinanced mortgages and is generous when it comes to loan fees as well.
LoanDepot`s menu of mortgage products includes jumbo loans, fixed- and adjustable-rate loans for purchases and refinances as well as loans backed by the FHA and the Department of Veterans Affairs. However, USDA, which is a government-backed mortgage, is not offered. The company also offers renovation loans, including FHA 203 k fixer-upper loans as well as Fannie Mae HomeStyle Home improvement loans. The two programs give you the flexibility to purchase and improve your property with just a single loan. You can also opt to use them to refinance your existing mortgage and perform some remodeling. It does publish its interest rates on the website. You can’t customize them according to your credit score or location, so your final rate will likely vary. Keep in mind that its rate assumptions are based on a borrower with a credit score of not less than 740 and a debt-to-income ratio of 35 percent or lower.
LoanDepot is licensed to offer mortgages in all 50 states, which enhances its value as a comprehensive option for home financing. While the company may not be specialized in a single type of home loan, its smooth we experience, diversity of product make it a versatile option.
- High loan limits
- No prepayment fee
- No steering policy
- High origination fees
3. Lenda | Best online-only mortgage lender
Lenda is a member of the online-only mortgage lending industry. It offers quick and straightforward pre-qualifications and refinancing estimates via its website. The lender offers a concierge service to assist you through the borrowing process from start to finish. The process is paperless yet very transparent. You`ll feel comfortable through the stages. It will feel familiar to digital natives or people who have experience browsing the web.
The lender is known for its excellent customer service. Its digital system indicates what is needed and what documents might be missing. All that is required of you is to upload the right documents and follow the process, and the lender will do the rest. Lenda offers 30-year and 15-year fixed-rate loans and refinance options such as cash-out, mortgage consolidation and buy-out. You can refinance your adjustable-rate mortgage to a fixed-rate or refinance your mortgage once you get to 20% equity. To qualify for a mortgage with this lender, you`ll need to have a fair or better credit score, which stands at around 620 FICO score. This is because Lenda only offers conventional home loans. Such loans have a high standard as the government does not offer a guarantee for untraditional borrowers.
- Completely online
- No origination fee required
- Faster loan process
- FHA and VA loans not offered
4. Quicken Loans | Biggest and most reputable mortgage lender
Quicken Loans is a reputable mortgage lender with robust online and TV advertising campaigns showcasing its premier Rocket Mortgage product. The company is considered the biggest lender for a reason. It boasts a nationwide footprint and makes its mortgage application process easy for you. It has competitive rates, which help solidify its positions as the top mortgage lender.
Once you choose to dip your toe into the mortgage market, you can get options like fixed-rate, Adjustable-rate, FHA, jumbo, USDA and VA loans from Quicken loans. An eligible applicant is required to put as little as 1% down using the company’s 1% down payment option. Quicken Loan`s website is simple and allows you to identify your borrowing capability almost immediately, thanks to the calculator on their webpage. Once you fill in your basic information, the online calculator will provide you with an option to acquire custom rates, which was quite a tedious process in the past. Additionally, you can also connect your bank account during the application process and let Quicken`s system do all the work for you.
- Wide variety of mortgage products
- Great customer service
- Online loan application process
- Wide variety of mortgage products
5. SoFi Mortgage | Offers flexible lending options
SoFi offers you flexible lending options that would traditionally not be accepted. While other US mortgage lenders are likely to decline applicants based on their credit score and debt-to-income ratio, this lender examines disposable income among other indicators of responsible borrowing habits to inform if an applicant is approved for a loan. For those that were offered post review, many SoFi loan borrowers reveal that they could not have qualified for a home loan otherwise.
They liked the options on SoFi and its unique loan approval technique. SoFi also offers flexible down payments ranging between ten and 50 percent, even on jumbo loans. In just a single sitting, SoFi can offer upfront, loan pre-qualification. To be an ideal candidate, you need to be consistently in the high-income bracket, have some savings as well as a reliable history of making timely loan payments. Keep in mind that you`ll be expected to make a down payment of at least 10% of the purchase for new mortgages. SoFi does not need PMI on any of its loans, even when your down payment is below 20%. Additionally, the lender does not charge loan origination broker commission or application fees. For you to get quotes, you`ll be required to sign up for a SoFi account and provide some personal details.
- Fast approval
- Flexible options
- No minimum FICO score
- No government-backed loans
- No home equity loans offered
Pros and Cons of Having Mortgages?
Getting a mortgage should be straightforward as long as you know that you have kept up to date with your credit score, all the required details, a lender you can trust and a property to buy or refinance.
Discussed above are our selection of the best US mortgage lenders that has been based on the evaluation of the services and products they offer to customers who are shopping for a good mortgage. Thus, you can be sure to find a good, reliable mortgage lender on our list.
Choose the best one now and get yourself a new home.
Stats from the US Mortgage Market
Outstanding US Mortgage Debt
Outstanding mortgage debt in the US hit a record high of $15.8 trillion in Q3 2019. Data compiled by LearnBonds.com indicates that the latest amounts are the highest since the 2008 economic crisis which stood at $14.7 trillion.
From the 2013 Q3, the debt has increased in a steady trajectory to hit the latest figures recorded in 2019. From the data, there was $401 billion in newly originated mortgage debt in 2018 Q4. On the other hand, mortgage delinquencies were flat with 1.1% of mortgage balances 90 or more days delinquent in 2018 Q3.
Mortgage Debt by Property Type
The data also gives insight into outstanding mortgage debt based on property and type where one to four families had debts worth $11,074,883 by close of 2019 Q3. From 2015 the rates have also been steadily increasing due to various factors.
The same trend has also been replicated on the properties involving multifamily residence by the close of Q3 2019, the rates stood $1,565,053. Multifamily debt refers to loans on structures of five or more units.
For non-farm and nonresidential mortgages, the outstanding mortgage has been increasing since 2015. However, between the third 2018 Q3 and Q1 2019, there was some sort of steadiness. Between the two quarters where the difference was $259, 0253. Though we have a steady increase in debt involving farm mortgages, the figures have remained generally low. The rates grew by 17.9% to stand at $254,077 from $208,800 recorded in 2015.
Glossary of Loan Terms
What is a Mortgage?
A mortgage is a certain type of loan that’s used to buy a home, a piece of land or property. The loan is offered by a bank, or by credit unions, as well as other financial institutions within the US. A mortgage is secured by the property or home itself, so if you, as the borrower, are unable to pay the loan, the lender can sell your property and recoup the losses. Mortgage repayments are made monthly and comprise four components which are interest, insurance, taxes and principal.
How does a mortgage work?
As stated above, a mortgage is essentially a loan to help you purchase a home or property. You'll usually be required to put down a deposit at a certain percentage of the property value and then the mortgage will enable you to borrow the rest from a lender. After securing the mortgage, you'll be required to pay back what you owe every month up over, what is usually a long period of time. Most mortgage terms usually run for 25 years, but your lender might allow shorter or longer terms than this. You'll also typically pay interest on the loan amount each month as well, either at a variable or fixed rate of interest, depending on the type of mortgage deal you choose.
Is a great credit score required to secure a mortgage?
Not necessarily, but it can help you to obtain a better deal.
What is the best type of mortgage for me?
There are several types of mortgages to choose from. For example, a conventional mortgage tends to be tougher credit-wise, while an FHA one can be costlier. There is a VA loan for veterans and USDA mortgage if you need to purchase a home in a rural area. It all boils down to your needs and preferences.
Should I opt for a 15-year or 30-year term mortgage?
This will depend on how much you feel you can stretch your budget. A 15-year mortgage is suitable in terms of interest rates if you can afford the higher monthly repayments.
Will my interest rate change?
This will depend on the type of mortgage you choose. For example, FHA mortgages have a fixed rate, which means your rate won’t change.
How long will it take to get my mortgage?
The amount of time you`ll have to wait will vary depending on the lender you choose.