How to Choose the Best Mortgage Lender or Broker

Choosing a lender or a mortgage broker can be a bit overwhelmoing — there are so many options to choose from, and your choice will have a large impact on the rates and terms of your mortgage. Follow these tips to select the banker or broker who can get the best mortgage deal for you.

Get recommendations from people you trust

Ask your Realtor, friends, family and acquaintances for recommendations. Ask people to rate brokers they’ve worked with in terms of the rates and conditions of the mortgages they’ve received, the ease of working with that broker or lender, if they experienced any unexpected surprises and if their transaction closed on time.

Questions to ask include: (1) Would they use their broker again, (2) did the broker explain their loans’ conditions and rates in easily understood terms, (3) did they get the interest rate they were promised, (4) were there any unexpected fees, (5) and did their loan close on time?
Shop online

Surf the Web to shop anonymously for home loans and rates. This will give you a good idea of home loans’ rates and fees. One place to try is Trulia Mortgage, which can get you quotes from banks and credit unions across the U.S. — no personal information is required.

You can simplify your search by choosing just one type of loan (e.g., a 30-year, fixed-rate mortgage with no points) — that will make comparing loan offers across the multitude available easier, especially since loan rates and terms can change daily.

However, when shopping online, it’s not a good idea to offer personal information like your social security number or your home address, which can be sold, or used to pull up your credit report.
Go to your bank

With the information you’ve gathered online, you can try your bank — the bank that has your checking account may be willing to offer you a deal — and compare their offerings.

Or, go to branches of local national banks, community banks and credit unions whose names you trust. Compare the rates and terms they offer with the ones you found online.

Check out mtgprofessor.com, which rates banks on factors including the transparency of their loan terms and fees.
Visit mortgage brokers

Once you’ve shopped online and at a few banks, visit a few mortgage brokers who’ve been recommended to you by your Realtor, friends, family and colleagues and see if they can offer you a better deal for your loan of choice. A broker’s job is to hunt down a loan by searching the offerings of several lenders.

Ask the brokers how they will be paid – a broker either charges a flat fee, earns money from lenders, or a combination of both. You want to make sure that their fees don’t prove to be too high. You can ask that the broker set his fee (what he will get from you and the lender) in advance in writing. Be sure to have the broker disclose to you in writing all fees, terms, and penalties associated with the loans they suggest.

You don’t want the compensation that a broker gets from a bank to be too high — this compensation can encourage less than reputable brokers to steer you into loans with elevated interest rates and terms that don’t suit your needs.

You’ll also want to ask the broker how many lenders he’ll check for you for rates and terms.

You could also try only choosing from brokers who belong to the Upfront Mortgage Brokers Association. These brokers have agreed to provide advance notice in writing to consumers about the size of their compensations and where their compensations come from. The site offers a tool to search for loan officers by state.

Another website to check is NAMB.org, the website of the National Association of Mortgage Brokers. There you can look up the names of mortgage brokers in your area.

Before you hire a mortgage broker, also be sure to check his firm’s complaint record with the Better Business Bureau.