How to Choose Between Mortgage Companies When Buying a House

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One of the biggest purchases you’ll ever make is your home. And, because of the cost involved, it’s no surprise that 88% of homebuyers finance their purchase with a mortgage, according to a 2018 report from the National Association of Realtors (NAR).

As you figure out the logistics of buying a home, the right lender can be a big help. Comparing mortgage companies and choosing the right one for your situation can make the process more smooth and help you feel comfortable with your decision.

Here’s what you need to know about getting your home deal done.

What are mortgage companies?

Mortgage companies are just what they sound like: companies that specialize in mortgages. While banks and credit unions offer mortgages, they also offer many other financial products and services. Mortgage companies focus mainly on processing mortgage applications and getting the funding for home loans.

There are some companies, such as Quicken Loans and Nationstar Mortgage Holdings, that specialize particularly in mortgages. These nonbank companies offer many mortgage product options, ranging from conventional mortgages to government-backed programs.

Besides specialized mortgage companies, many banks and credit unions offer access to home financing. You can probably find a number of home loan products and services at your local or regional financial institution, as well as from large national banks such as Wells Fargo and Bank of America.

How do mortgage companies work?

In some cases, the mortgage company doesn’t actually fund the loan. Instead, the mortgage company originates the loan and gets money for it from a client institution. The loan’s originator gets a commission from the lender providing the capital. The lender then collects payment and interest or sells the loan.

find right mortgage company

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Institutions that both originate and fund mortgage loans in addition to other services might have a financial advantage. With money coming in from interest paid on the loans, plus the money from other loans and banking services, it’s easier for diversified firms to weather financial downturns.

As a result, borrowers might be able to stick with the same servicer throughout the term of the loan, reducing the chance of lost paperwork when switching servicers.

The limited scope on the part of some mortgage companies put them out of commission during the crisis of 2007-2008. The companies couldn’t overcome the housing market crash because their assets weren’t as diversified, according to Investopedia.

This doesn’t mean it’s a bad idea to use a mortgage company. Because mortgage companies specialize in funding home purchases, using one can make the whole process easier, according to Jason Lerner, an executive at George Mason Mortgage.

Lerner’s helped more than 5,000 families with their mortgages. “Finding a good mortgage company is as much about the actual loan officer,” he said.

With the right experience and expertise, you’ll receive guidance throughout the process and avoid unpleasant hang-ups, such as having your application held up by an error on your credit report or having the closing date moved because of missing paperwork.

How to find the right mortgage company for you

Because there are so many mortgage companies, it’s important to be prepared to do some comparison shopping. Here are a few steps you can take to narrow your options and work with a company that makes sense for you.

Start with referrals from friends and family

Lerner recommended starting with friends and family. “Ask around,” he said. “Who did your friends and family use for their mortgage that treated them well?”

Ask the following questions to people you trust to give you insight into the process they completed:

  • What did you like most about the process?
  • What did you like least?
  • Did the loan officer answer your questions?
  • How smooth was the process?
  • Would you use the company again for another mortgage?
  • Did the company explain multiple options to you and review the pros and cons?

After you ask these questions, you’ll have a pretty good idea of where to start as you look for someone to handle this large transaction.

Ask your real estate agent

Referrals don’t just have to come from friends and family. When I bought a home in 2007, I wasn’t sure where to turn for my mortgage. So I asked my real estate agent.

I was not alone. According to the NAR report, 74% of buyers 36 years old and younger look to an agent for help in understanding the buying process.

While your real estate agent can’t take care of the loan for you, there’s a good chance they have a go-to mortgage company or loan officer with which they like working.

Realize, though, that the real estate agent might receive a referral bonus, so compare the terms with other companies to be sure you’re getting the best deal. My real estate agent pointed me toward a mortgage broker stationed at a regional bank.

While I shopped around, I decided I liked the broker recommended by my real estate agent. Plus, because they had worked together before, it made the process quicker and easier. There were almost no hiccups in the mortgage process.

Look online

There are plenty of websites that can help you find a good mortgage lender to meet your needs. All you have to do is search “mortgage companies” or “home loans,” and you’ll get plenty of options.

There are websites that aggregate different lenders. These make it easy to get a list of mortgage lenders to narrow down your search.

While your acquaintances and real estate agent can provide valuable counsel, you can also get a good idea of what to expect by looking at online reviews of different companies.

“Yelp and Zillow are a great way to see how the actual lender treats their clients,” said Jennifer Beeston, vice president of mortgage lending at Guaranteed Rate.

Read both positive and negative reviews to get a feel for how the company operates.

Research programs offered by mortgage companies

While you’re doing some poking around, be sure to find out what specialized programs different companies offer, suggested Lerner. “Some companies are better for borrowers with specific needs,” he said. “They might offer specialized programs for first-time homebuyers or large amounts.”

Evaluate your needs and then look for a mortgage company that has programs to meet those needs. In some cases, a broker can be helpful. Mortgage brokers are able to work with several different companies, and they’re often familiar with the different programs available.

Interview the loan officer

After you’ve done some research, Beeston said, it’s a good idea to actually speak with the person who’ll handle your loan. “Make sure you vibe with them before you move forward,” she said. “You should have a good relationship with your lender and feel comfortable with them.”

At the very least, speak with someone at the loan company to get a general idea of how clients are treated. Look for professionalism, responsiveness, and punctuality.

Also, pay attention to whether the loan officer listens to you and your needs. Do the programs offered to you make sense for your situation? If a loan officer tries to push you into something that you already said you don’t like, that’s a red flag.

In some cases, you might not be able to talk to a person. If you’re handling your mortgage online, use email as a guide. But even online mortgage companies often have representatives with whom you can talk.

Verify the legitimacy of the mortgage company

Unfortunately, scams are very real. As a result, it’s important to make sure you’re working with a reputable institution.

Mortgage companies have to register in the states they operate in. Check with the state agency responsible for these companies. Often, it’s the attorney general. But there might be a specific financial and banking oversight agency. Make sure the registration is up-to-date.

You can also search if the company is an accredited member of the Better Business Bureau. You’ll also be able to see any complaints against the company.

Compare rates and mortgage terms

You want to make sure you’re getting the best deal on your mortgage, so it’s important to find out the rates and terms for which you’ll qualify. You’ll get the best results when you have accurate information, so check your credit score ahead of time.

While the interest rate isn’t everything, it does matter a great deal, especially with such a large loan. One of the easiest ways to compare mortgage rates is to look online. Many websites offer comparisons. Just make sure you’re comparing similar loan offers.

I checked with several lenders for rate comparisons. The program I ended up with didn’t have the lowest rate, but it did have many other helpful features aimed at helping first-time homebuyers. It was also flexible on the down payment, which was important to me at the time.

My mortgage broker worked with me to find overall terms that got me into the home I wanted in a way I could afford.

Working with your mortgage company to close on a home loan

Whether you’re a first-time homebuyer or you’ve been around this block before, working with your mortgage company to get the deal done is a must.

Here are the steps you should take once you decide on a mortgage company.

1. Get preapproved

One of the best things you can do is get preapproval from your lender. During this process, a mortgage lender reviews your information (including your credit) and lets you know how much you can borrow and the interest rate you’ll receive. Often, this is the time for you to lock in your interest rate.

During my preapproval, I ended up with a provision that I would get a lower mortgage rate if one was available by the time we got to closing. Because closing can take up to eight weeks (or longer), protecting your rate from market fluctuations is important.

With your preapproval letter, your real estate agent has a better idea of what homes will work best for your budget. Additionally, sellers know you’re serious when you have a preapproval letter.

2. Gather required documents

Even as you’re looking for your dream home, it’s important to realize that you need to gather documentation for your mortgage application. A preapproval isn’t the end of the process — it’s the beginning.

Often, these are the documents that mortgage companies look for when processing your application:

  • Identification (address, phone number, driver’s license, passport, Social Security number, etc.)
  • Pay stubs
  • Tax returns
  • Bank statements
  • Investment statements
  • Debt

Additionally, there might be other documents needed. For example, when I bought my home, almost all my household income came from self-employment. I had to go through an audit with an accountant to verify my income sources. The longer it takes to gather your documents, the longer it’ll be before you can close on your house.

3. Verify your loan program

Figure out which loan program you’ll use. Mortgage companies offer different options, including loans that might be guaranteed by the government, such as one from the Federal Housing Administration.

Throughout the process, while you’re providing documents and looking for a home, you’ll work with your lender to get everything ready ahead of closing. Your real estate agent can also help you manage the details and work with your lender.

4. Gather the down payment

If you’re making a down payment, you need to get the funds together. Understand that if you get money from someone else, it needs to be a gift. Most lenders won’t accept a loan as a down payment.

In fact, the person providing the money might even have to sign a statement saying that you aren’t required to repay them. When my parents helped me with a down payment, they had to talk to the mortgage broker and verify that they were making a gift, not a loan.

5. Don’t make any big purchases

Even though the lender ran your credit during preapproval, some lenders check into your situation again before finalizing the deal. Any big changes in your situation — including large purchases put on credit cards, big withdrawals, or big deposits — could flag your transaction and slow things down.

Once you start working with a mortgage company to get funding for your home purchase, you don’t want to make any major changes to your financial situation.

6. Wait for other verification

Mortgage companies also take other steps while you’re waiting for the closing to arrive. They verify the title of the home and make sure there aren’t liens or other issues with it. Additionally, the title needs to be transferred to your name.

Delays in documentation can hold up your closing, so stay in contact with your real estate agent and mortgage company throughout so that problems can be resolved as quickly as possible.

7. Be ready to act at a moment’s notice

While you’ll be given an approximate closing date, the reality is that you’ll be asked to move at a moment’s notice. You can choose to wire the money to the required escrow account, bring a cashier’s check, or use other options to provide the down payment for the closing.

Be careful, though. Down payment scams are on the rise, so verify where to send your money with the mortgage company before you commit the funds.

This is also when the papers are signed. You can bring a lawyer with you to the closing to review the final documents. However, you should already have received a copy. Before you sign, make sure the terms and information match what you’ve been told. A lawyer can verify that everything’s in order before you put pen to paper.

Final thoughts on mortgage companies

Purchasing a home is a big step. In fact, it’s probably the most expensive thing you’ll buy. Working with the right mortgage company can help you get the best financing for your situation. Research your options and choose a company that feels comfortable to you and that provides you what you need.

With the right team on your side, your closing is likely to be faster — and even a little easier — than you thought.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.