Mortgage Shopping? Here's How to Pick the Right Lender

To call the current housing market "difficult" might be a huge understatement. The supply of homes for sale is still down, in fact, more like record lows in some bay area cities. And mortgage loan rates are more than twice what they were in the salad days of 2020 and 2021 where you can sell a house by simply putting up a sign and get multiple offers coming in within days. That ship as sailed. As of this writing, we're looking at an average rate of 7.5% for a 30-year fixed-rate mortgage, according to Freddie Mac (and according to me, I believe they may even hit 9 or 10% within the next three years; but that's another article for another time).

If you're thinking about buying a home, it's natural to feel discouraged and perhaps even a bit hopeless at finding an affordable mortgage loan. Thankfully, there are a few considerations you can make that will help you narrow down your prospective lenders and find the right pre-approval options. Below are the four steps I would take to get started on your homeownership journey. And remember: you may not be able to buy a home in two weeks - maybe not even two months - it might be two years depending where you are financially. But the point you need to start somewhere, so just start. Once you start you'll get a better picture of where you're at and how to get to where you want to be.

1. Consider Your Credit

Your credit history is a significant factor when you're seeking out a mortgage loan. A mortgage is likely to be the largest sum of money you'll ever borrow in your life. The lenders you apply with will take a deep dive into your credit report on the way to (hopefully) approving you.

With that in mind, you can make a few moves ahead of time to put yourself in the best possible position to find the right lender if you have less-than-stellar credit - or better yet: work on your credit BEFORE you see a lender.

If you click on the photo below, it will take you to my youtube video that I made in the beginning of this year. If your credit score is a bit low or has minor to even major dings, I will show you a step-by-step process on how to raise your credit score 20, 30 or even 50 points in just 10-15 business days. It's absolutely FREE and I will help your personally if you need it. Just click the photo below and watch the video:

You can also start right now by simply heading over to: AnnualCreditReport.com (that's the first thing I mention in the video) to get copies of your credit reports from the three major consumer credit bureaus for FREE (or their may be a small fee by now). If your credit score is on the lower side, and you have some black marks on your report, you can look to the best mortgage lenders for bad credit, as these lenders will be more willing to work with you. However, I don't recommend this. You'll be paying through the nose in interest and fees. So why do these places exist? I think it's just because of time and money. I put the option out there if you just don't have the time to DIY credit repair, but have the money to pay 80-100 bucks a month for them to do it for you (there are "credit repair companies" out there that do this as well). But if you follow the instructions on my video you can dramatically increase your score in just days with just a little bit of effort (and personal help from me).

My picks for the best credit cards

Once you get your credit cleaned up, you should have at least two credit cards that are worthy of a spot in your wallet. Before interest rates rose, I'd always recommend starting of with a "Credit Union" credit card. Before the Feds raised interest rates, these were easier to get and had the lowest interest rates (I cover this fully in my video above). But if you want more cards that are rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards. WARNNING: The borrower is always slave to the lender (Proverbs 22:7). Use credit wisely, and then discontinue use and destroy the cards once your financial goal has been achieved.

2. Consider your down payment

Your down payment is another matter of major importance when it comes to finding a lender to work with. Some offer special programs for those with lower down payments, for example -- so if you know you'll be aiming for a 10% down payment, seek out lenders that offer flexibility in how much you can put down. Similarly, if you have a high enough credit score, you might be able to get away with just a 3% down payment on a conventional mortgage loan. And don't forget about grants, down payment assistance and points for "buying down" your interest rates. In other words, Lenders have many different loan products depending on the type of home you're looking to buy. I prefer to work with a "loan broker" that will shop your loan around to their lenders saving you a lot of time when comparing the best loan for you (Number 3 below).

It's important to note that a down payment under 20% will add additional expenses to your mortgage loan in most cases. You'll have to pay for private mortgage insurance (PMI) on a conventional loan with less than 20% down. You'll likely also have more options among the best mortgage lenders if you can make a 20% down payment.

3. Consider what type of mortgage you want

There is no one-size-fits-all mortgage loan, which is actually good news for you as a buyer -- even if it means you might need to do more research and legwork before applying for different types of loans.

• If you're a first-time home buyer and your credit score isn't the greatest, an FHA loan might be a good fit for you.
• If you're a current or former military service member, you may qualify for a VA loan.
• Live in a rural area? Look into USDA loans. All these government-backed mortgage options have less stringent credit score and income requirements than conventional loans do.

If you have another special factor that will figure into your search for a mortgage, such as being self-employed with irregular income, you might want to seek out a non-qualified mortgage. The process for getting one of these is nearly the same as for a traditional mortgage, but you'll likely need to provide more or different financial information to prove your income if it's irregular, such as tax returns rather than pay stubs or W-2s.

Today's market may be less than ideal (there's that understatement again), but the wide selection of mortgage lenders and types of home loans could mean that the right lender is out there for you, and you've just got to dig a little bit to find it. Use the above pointers to help you narrow your search or, better yet, reach out to me and I'll be happy to referrer to my lenders or loan brokers. The best part about recommendations is I know them personally, built relationships with them throughout the years, they treat all my clients like family and if there's an issue, I'm not shy about calling them at 10pm at night (yeah, I pick up the phone and call, not text). I hope all the information above was helpful in getting you started in making your dream of being a homeowner a reality.