How to Choose a Mortgage Lender

If you’re thinking about buying a home in San Jose, you’re thinking about how to finance it. There are many options for home loans– banks, mortgage brokers, credit unions, and newer online lenders. With all these options, how can you decide which will work best for you.

To find the best possible lender, it’s important to understand why choosing the right one matters so much. Aren’t they all about the same? Not exactly.  There are two key reasons to choose the right lender:

1. Perform on Time - When you write a purchase contract, you and your agent are putting timelines in the contract.  These are promises to the seller that you will perform on a schedule. What happens if you don't perform to those timelines? Simply, things get messy. So, it's really important to choose a lender that has recent experience and can be realistic in the current market. 

2. Communication/Teamwork - Another advantage to having the right mortgage broker is to help your offer be more competitive. Your team can be influential to your offer being chosen. The right lender knows how to connect with the listing agent, your agent and you with proper updates and clear plans.

Watch a video where I interview one of our recommended lenders about what to look for when searching for a mortgage lender to work with.

Video tips on how to choose a mortgage lender

How to choose a mortgage lender

Understand the role of a mortgage loan officer (MLO) or mortgage broker

It’s best to understand what a mortgage loan officer actually does before you choose one. Ultimately, your mortgage lender's job is to help you secure a loan for your home purchase, but there are a number of things they need to do to make that happen.

Here is what a mortgage loan officer needs to do for you:

  • Help you find the best loan - A loan officer is going to help you find a loan that works for your budget and qualifications. Everyone has different qualifications and needs to be setup with the best loan program.  
  • Lock in the rate - The lender should be able to lock the rate that they're promising you. That is important that they deliver on what they are saying.
  • Keep the timeline - Work within the contract timelines as promised.
  • Communicate to all - One key duty of a loan officer is to communicate to all parties. Of course, that means you, but did you know that  it's also critical that they're communicating with your agent and the listing agent of the property?

Confused about the terminology? 

A mortgage lender is the financial institution that provides the funds. 

A mortgage loan officer (MLO) is an individual employed by a mortgage lender to help guide borrowers through the process. 

A mortgage broker is an intermediary who connects borrowers with multiple potential mortgage lenders– they are not employed by a specific lender and can shop around on your behalf.

Research different mortgage options

The lender you choose will be able to guide you through the options, but it’s best to have a sense of what’s available so you can ask good questions. Here are some different mortgage options that home buyers use in San Jose:

Conventional loans -  Conventional loans are mortgage loans issued by private lenders. The terms and interest rates are determined by these same lenders. Conventional home loans typically require a higher credit score and are not insured or guaranteed by a government entity.

Jumbo loans (and other non-conventional loans) - Jumbo loans are non-conforming mortgages that exceed the loan limits set by government-sponsored entities, designed for high-value homes and usually requiring larger down payments and strong credit. These are more popular in San Jose than in other areas due to the high cost of homes.

FHA and other government-backed loans - FHA loans, along with other government-backed loans, are mortgages insured or guaranteed by government agencies, making them more accessible to borrowers with lower credit scores and smaller down payments. In the San Jose area, we sometimes see these types of loan with first time homebuyers trying to get into a condo

Fixed-rate mortgages - Fixed-rate mortgages have a stable interest rate over the loan's term, ensuring consistent monthly payments, making budgeting easier for homeowners. One of the most common home loans is a 30-year fixed-rate mortgage.

Adjustable-rate mortgages - Adjustable-rate mortgages (ARMs) have interest rates that can change periodically, often resulting in lower initial payments but with potential future rate adjustments that can affect monthly payments.

Seek recommendations from friends, family, and your agent

To find a lender, gather a list of lenders to interview. Your agent will have recommended lenders for you to reach out to. You can also ask friends and family who have recently made a home purchase (not a refinance, that’s different) who they used and what they liked about them.

Interview and assess agents

Once you’ve narrowed your list down to two or three agents, it’s time to call them up and interview them. This will give you a sense for their communication style and help you establish whether they’re someone you can work with. It will also help you understand the terms offered and what kind of loans are likely available for your situation.

Here are some questions to ask a mortgage lender when you’re interviewing them:

  • What types of mortgages do you offer?
  • What are the current interest rates and terms?
  • What is the down payment requirement?
  • What are expected closing costs?
  • Are there any points or origination fees?
  • What documentation is required for pre-approval and underwriting?
  • Do you offer rate locks?
  • What is the estimated timeline for closing?
  • Can you explain the loan application process?
  • What is the minimum credit score requirement?
  • What is the debt-to-income ratio requirement?.
  • Do you offer any special programs or incentives?
  • Can you provide references or reviews from past clients?
  • What is your communication style and availability?
  • What happens if the loan is delayed or falls through?
  • What is the best way to contact you or your team?

Get pre-qualified with your top choice

Gather the paperwork for your loan application and get pre-qualified. Check to make sure that your pre-qualification matches the online calculator estimate you completed during the research phase. If it doesn’t match, make sure you understand why.

Other questions about mortgages?

If you have other questions about buying a home in San Jose, read our step-by-step guide to buying a house. Ready to set up your team? Schedule your home buyer consult today so we can talk more about your home-buying goals.

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