Fortunly’s Guide to the Best Mortgage Lenders in 2021
Buying a place of your own is the pinnacle of adulthood — it means all those years of hard work have finally paid off, and now you get to have a real home to call your own. To help you make this step, we’ve compiled a list of the best mortgage lenders for different needs. A mortgage is not just a loan, it’s an investment in your future. It’s important to make the right choice.
Top 7 Mortgage Lenders of 2021
LendingTree is one of the nation’s leading lending marketplaces. It’s an online platform that lets you search for lenders that will suit your needs, and it connects you with the very best mortgage lenders for refinancing, home purchase, or reverse mortgage. Read Review
- •Fast application process
- •Multiple lending options
- •Options for low-credit customers
Quicken is the kind of company that understands that buying a home is a huge step for any person. The company’s goal is to make things simple for clients, so they’ve streamlined the process of getting a loan. Read Review
- •Easy application process
- •Huge library of educational resources
- •24/7 customer support
As a company that’s dedicated to fostering homeownership in America, Freedom Mortgage is one of the best mortgage lenders for veterans. Read Review
- •Competitive interest rates
- •Great for veterans
- •Useful online tools
Rocket Mortgage is an online lender with a handy platform that’s aimed at making the lending process easy even for the inexperienced buyer. Read Review
- •Fully optimized online application
- •Fast loan application and approval
- •Federally-backed programs
SoFi is one of the more specific lenders out there — they specialize in borrowing jumbo loans to borrowers with good credit scores but not enough money in their savings account to leave a large down payment. Read Review
- •Pre-approval options
- •Easier access to jumbo loans
- •Great option for high-credit borrowers
CitiMortgage is a great choice for fair credit because they offer a full range of services. They give borrowers low down payment options and you can get pre-approved for a loan in case the home seller you plan to purchase from needs a confirmation. Read Review
- •Discounts for repeat customers
- •Fast application process
- •Great customer service
AmeriSave offers excellent loan variety, expert agents to help you at every turn, and great interest rates for your loans. Read Review
- •Access to mortgage loan specialists
- •Close your applications online
- •Great educational resources
How We Found the Best Online Mortgage Lenders — Our Methodology
Finding the best home mortgage lenders is a tricky thing to do. There are many things to consider when picking a loan provider, and it’s not exactly the kind of decision you can play around with. You’re entering into a relationship that will endure for years or decades.
How do you find the best rated mortgage lenders? You don’t have to — we did it for you. We tested a multitude of lenders to find the ones that are really worth your time and that can give you the cash to buy your dream home.
To make sure you know exactly what you’re getting, we’d like to show you our methodology. We’ll go through each step of the vetting process and tell you what we paid attention to when making our list. We’ll show you how we found top mortgage lenders and how to shop for a mortgage yourself.
Here’s what we examined:
Types of Loans Offered
There are several types of loans you should know about if you plan to purchase your own home. Let’s take a look:
- Fixed-rate mortgage loans
- Interest-only mortgage loans
- Adjustable-rate mortgage loans
- Federal Housing Administration loans
- Veterans Administration mortgage loans
- USDA mortgage loans
- Jumbo mortgage loans
- Balloon mortgage loans
We’ve examined which services the lenders have to offer, and we’ve picked the best mortgage lenders that have a variety of products at their disposal.
Speed of Approval and Funding
The speed at which you get your cash is essential when it comes to mortgages. Imagine finding your perfect home and then losing it because your bank couldn’t approve a loan fast enough, so another family got in there before you. We don’t want that to happen, so we chose only the very best lenders for mortgage that get you what you need quickly.
Time is of the essence when you’re shopping for a home. While buying a property isn’t a small decision, once you do decide to find something, you want the process to move as fast as possible so you can start your new life. All of the lenders on our list are there to make the process smooth, easy, and fast.
Appraisal of Property
Property appraisal is an unbiased view of the home’s value by an impartial expert. It’s a key part of the home purchasing process. If you want to buy property, it’s important that you understand how appraisal works.
All the best online mortgage lenders will include appraisal in their purchase-and-sale transactions. The appraisal is used to determine whether the home’s price is worth it given the condition the home is in. The location and the special features of the home are also included in the process. The companies want to make sure you aren’t borrowing more money than the home is worth, because the home will serve as collateral should you default on the loan. This is a way for a bank to protect itself should things go awry.
The appraisal must be conducted by a licensed, qualified professional. You’ll have to arrange for the appraisal yourself, even though it’s there to protect the lender, not you. However, the best home loan lenders will often help you get in touch with the right kind of professional.
The Appraisal Process
Freddie Mac’s Uniform Residential Appraisal Report is typically used to assess single-family homes. Here are some of the things the professional will look at when examining your future home: the interior and the exterior, the appearance of the neighborhood, the price of other homes in the neighborhood. They will examine the home’s amenities, the number of bedrooms, the square footage, the properties of the geographic area around it, and the floorplan’s functionality.
The report that the appraisal worker provides is very detailed and backed by evidence: photographs of every room and the front and back of the house are taken, a street map with comparable sales in the area is provided, and the worker also describes how square footage was calculated. Private mortgage lenders examine this data in addition to the documentation that also has to be provided. Market sales data, public land records, and public tax records all need to be gathered.
What’s the price of an appraisal? Usually several hundred dollars.
Benefits of Appraisals
Appraisals sound like nothing but a hassle for the borrower. They’re an added expense you feel like you really don’t need right now, and so much paperwork is needed to get it all done neatly that it seems like there’s no benefit to it. However, an appraisal could be useful for you. If the appraisal comes in below the price that the seller wants for the property, you can use it to negotiate a lower price.
When it comes to mortgage rate interest rates, the history of your home plays a role if you want to find the best mortgage refinance lenders. If you want to refinance, you will also have to go through an appraisal, and if the appraisal comes in below the price, your loan might not be approved. However, if you got a mortgage through an FHA loan, then you could apply for a refinance loan without going through an appraisal. You can opt for the FHA Streamline program, which is a good choice for underwater homeowners.
In general, an appraisal is just another step in the process. Tick it off your list and you’ll be able to find the best mortgage rates because lenders will connect you with professionals who know what they’re doing and know how to assess the value of a home.
What good is a loan if you can’t qualify for it? Good rates and flexibility are almost always ensured if you have a perfect credit score, but what if your financial history isn’t immaculate? We’ve examined what each of these online mortgage lenders demands to see before they give you the cash. Here’s what we watched out for:
Down payment needed: While VA mortgage loans usually don’t require a down payment, most other types of loans do. The down payment percentage varies from lender to lender, and it will depend mostly on your credit score. Some lenders require a larger down payment — this isn’t necessarily a bad thing. The company is just trying to ensure you can really afford the house you want to buy. However, some people might not have enough cash lying around to make that first move, and we took that into consideration. We’ll give you clear guidelines about what you can expect from each lender.
Credit score: People without a good credit score always worry that money will forever be out of their reach. But our list includes some of the best mortgage lenders for bad credit customers because we believe that your financial history shouldn’t follow you forever. We’ve examined each company’s credit score requirements, indicating them clearly in our tables and reviews. You can always count on accurate information here.
Having said all this, we’re aware that a good credit score goes a long way and that it could make it easier for you to get a better, cheaper loan. That’s why we’ve included a small section near the end of this page that gives you a few tips on how to fix your credit rating. To view it right away, click here.
Reliable income: You’ll get the best mortgage rates if you can prove to lenders that you have a steady and healthy cash flow. To prove that you can pay back your loan, you must have verifiable income, which can come from: your salary, bonuses, and commissions; income from rental properties; self-employment income; alimony; Social Security income; or investment income. For the most part, you’ll have to provide evidence that you’ve been receiving a steady income for the past two years. One-time bonuses won’t count because you can’t guarantee you’ll get the same kind of bonus again.
Back before the Great Recession, borrowers were able to simply state their income and get a loan approved. But after the disastrous consequences of the housing crisis, customers now have to provide hard evidence about their income, even if they have a good credit score. All of the best mortgage lenders for excellent credit will ask for this. Here are some of the examples of the documents you should prepare: tax returns, bank statements, pay stubs, and W-2s or 1099 forms.
Debt-to-income ratio: In addition to good income, you’ll also need to prove you don’t have too much debt to take on a new loan. If your DTI ratio is too high, you might not get approved for some loans. If you want to calculate your DTI on your own, simply add up all your monthly debt obligations and divide the sum by your gross income.
Even the best online mortgage lenders will have some operational fees that you might not expect. We’re here to make sure you’re fully prepared and know the exact cost of what you’ll be paying or financing. We’ll let you know if there’s anything you need to be aware of.
Top 7 Mortgage Lenders for 2021:
- LendingTree - Best for low-credit customers
- Quicken Loans - Easy application
- Freedom Mortgage - Best for veterans
- Rocket Mortgage - Best for federally-backed programs
- SoFi - Suitable for high-credit borrowers
- Citibank Mortgage - Discounts for returning customers
- AmeriSave - Best for online applications
The Best Mortgage Lenders — Reviews
On Official Website
- • Fast application process
- • Multiple lending options
- • Options for low-credit customers
LendingTree is one of the nation’s leading lending marketplaces. It’s an online platform that lets you search for lenders that will suit your needs, and it connects you with the very best mortgage lenders for refinancing, home purchase, or reverse mortgage. They offer great customer service and a whole range of options to finance your big purchase, and once you fill out one simple form, you’ll usually get a whole range of loan options within minutes. It’s an easy, smooth, and pleasant experience.
Types of loans
Any kind of loan you need, you can find at LendingTree.com. It takes about 10 minutes to finish filling out the application, and then you can check what kind of loan you’re looking for. To make it clearer, here are the options: fixed-rate mortgages, adjustable rate mortgages, jumbo loans, reverse mortgages, home equity loans and HELOC, FHA loans, VA loans, and HARP loans.
The best thing about this is that you can easily compare different types of loans. From the best mortgage lenders in Utah to banks in New York, you can easily find any kind of offer, anywhere you like. Once you compare everything, you can choose whatever works the best.
Who is it for?
Practically anyone. Lending Tree compiles different offers and presents you with a custom-tailored one. This is a great platform for busy people who don’t have the time to run from bank to bank because it lets you examine multiple lenders and banks at a single glance. You can easily use it for research purposes. They are particularly good if you want to find the best bad credit mortgage lenders, because you’ll immediately get a list of companies willing to work with clients with a poor credit score.
Simply go to LendingTree’s home page and click on the type of loan you want. The platform will guide you through each step and give you a list of companies at the end of the process. If you need help, you can contact customer service or use the website’s calculators and home valuation tools.
Bear in mind that you’ll need to know your credit score to get anywhere, so make sure to have that before you start.
One of the best things about LendingTree is that you can submit one application that is then sent to multiple lenders. It makes the process more streamlined and straightforward, and it helps you find the best banks for mortgages.
Watch out for
Since LendingTree sends your information to multiple lenders, sometimes those lenders will email you or give you a phone call. There’ll be people vying for your attention, which could be overwhelming if you’re not ready for it.
On Official Website
- • Easy application process
- • Huge library of educational resources
- • 24/7 customer support
Quicken is the kind of company that understands that buying a home is a huge step for anyone. Their main goal is to make things simple for clients, so they’ve streamlined the process of getting a loan. They want to get you the right mortgage, they want to do it quickly, and they want to give you an easy way to track it. In addition to excellent customer support, Quicken gives you a few online tools that you can use to track your repayment progress so you always know where you stand.
Types of loans
Quicken offers some of the best mortgage rates today because it gives you a wide range of options when it comes to picking a loan that’s just right for you. You can choose between fixed-rate mortgages, ARM mortgages, refinancing mortgages, conventional mortgages, FHA mortgages, VA mortgages, and USDA mortgages.
The application process is fast and easy, and it’s practically impossible to get lost because Quicken has great customer service. Some of their featured loans are fixed-rate loans for first-time home buyers, which let you make a down payment of less than 20%.
Who is it for?
Quicken Loans is one of the best mortgage lenders for almost anyone because it gives you a variety of options to choose from. They are great for first-time home buyers particularly because they have lower credit requirements than most banks, and they also offer a range of educational resources about home ownership and mortgages.
Quicken is also a great choice for borrowers who need a refinancing loan, especially if they have low or no equity in their home. With Quicken’s guides and HARP loans, you could get back on track.
It’s fairly straightforward. You go online, you click on “Buy a Home” or “Refinance,” and then you get started. You’ll answer a series of questions, including these:
- How much do you need to borrow?
- What’s the value of the home or equity you want?
- What’s your income?
Since Quicken Loans is one of the best mortgage lenders in Michigan, you can expect to get a response within minutes after filling out the form. The company will do a credit check and let you know which types of loans are available. After that, you can either choose one online or call a representative to help you finish the process. Quicken will make its secure online portal available to you, and you’ll be able to send them the necessary paperwork to start the lending process.
Quicken’s educational resources are incredibly useful. You can expect a seamless customer experience with really great customer support.
Watch out for
One of Quicken’s benefits can also be its biggest drawback — there are so many options available that you might end up feeling overwhelmed. Luckily, these home loan lenders offer 24/7 support, and you can simply contact a representative to help you out.
On Official Website
- • Competitive interest rates
- • Great for veterans
- • Useful online tools
As a company that’s dedicated to fostering homeownership in America, Freedom Mortgage is one of the best mortgage lenders for veterans. The company is committed to getting you cash as quickly as possible, and you can be certain of easy, professional service. They have several federally-backed loan programs that you can apply for, and their lending solutions are checked and certified.
Types of loans
Freedom Mortgage offers a wide variety of loans to suit your needs. They specialize in VA, FHA, USDA, and conventional mortgages. Their fixed-rate and ARM loans require a credit score of 620 and a down payment of 20%. Their jumbo loans require a credit score of at least 700.
They are some of the best mortgage lenders in Texas, and they also have offices in the following states: Arizona, Connecticut, Florida, Georgia, Iowa, Kansas, Maryland, Michigan, New Hampshire, New Jersey, North Carolina, Pennsylvania, and Virginia.
Who is it for?
Since they offer a variety of loans, Freedom Mortgage is a good choice for anyone. You can apply for their loans online, in person, or via phone, so you’ll have multiple options at your disposal. They also offer various government-backed loans and refinancing loans to suit your needs.
The application process is easy regardless of whether you choose to do it in person or online. If you want to do it online, you’ll need to create an account and fill in some basic information such as your ZIP Code, property information, details about yourself and your dependants, and your current place of residence.
Home loan lenders such as Freedom Mortgage make it quick and easy to fill out the online application. After you specify the type of home you want, how you intend to use it, and what kind of down payment you want to make, you’ll be asked to provide personal documents about your income, credit score, and debt-to-income ratio. You should find out whether your loan got approved within weeks, and then you can sign the deal with an e-signature.
A lot of different types of loans and a long history of professional conduct make Freedom Mortgage one of the top 10 best mortgage lenders in the US. They’re very welcoming and easy to work with, and their agents are experienced. You’ll be able to get all the help you need to close a good deal. You’ll also get some of the best interest rates around.
Freedom Mortgage provides loans for anyone regardless of their race, ethnicity, sex, gender, religion, disability, or sexual orientation. They just want to help you get a home.
Watch out for
While Freedom offers great interest rates, they’re not really advertised clearly on the website. To see the best deals, you have to provide personal information first.
On Official Website
- • Fully optimized online application
- • Fast loan application and approval
- • Federally-backed program
Rocket Mortgage is one of the best home mortgage refinance lenders around. This is an online lender with a handy online platform that’s aimed at making the lending process easy even for the inexperienced home buyer. The website has a smooth, intuitive design that doesn’t require a lot of time to learn, and it significantly reduces the stress out of taking out a loan.
Types of loans
You can apply for both purchase and refinance loans with Rocket Mortgage, and you’ll have access to VA mortgage loans, FHA mortgage loans, HARP refinancing loans, and traditional fixed-rate mortgage loans. The repertoire is somewhat limited compared to other companies on the list, but Rocket does offer great benefits and a competitive APR to borrowers.
Who is it for?
Since Rocket Mortgage is an online platform, they’re best suited for people who know their way around a phone or a computer. They’re great mortgage lenders for good credit, and they offer both a well-designed computer platform and a mobile app that is easy to navigate. You won’t be able to go to a physical location and talk to someone in-person, but the process is so streamlined it won’t matter.
You make an account, you fill out a questionnaire, you get your quotes — smooth, easy, quick. Making an account takes about five seconds, and you can get 24/7 online support whenever you need it. The questionnaire will ask you for personal information like your income and your credit score, and they’ll ask you about the kind of property you want to buy and whether you intend to use it as a place of residence, a vacation home, or a rental. When you get your quotes, you can adjust the down payment you intend to put down to get better rates.
Rocket Mortgage is one of the best online mortgage lenders on the market. The apps and the website are really easy to use, and they’re fully optimized for any type of device. Younger people who are used to the digital era will enjoy the smooth process with no bumps in the road and the easy access to any features they might need. You will get to see real-time updates about how your loan application is progressing, so you’ll always be on top of everything and can plan accordingly.
Watch out for
Rocket Mortgage requires you to make an account to see all the lending options and get quotes. If you’re just there to browse the market, this might be a problem for you. If you are serious about taking out a loan, however, then this might just be the best place to get a mortgage. Bear in mind that you’ll also see a lot of options — since Rocket wants you to get the best deal possible, you might end up feeling a little overwhelmed with the sheer number of offers you see.
On Official Website
- • Pre-approval options
- • Easier access to jumbo loans
- • Great option for high-credit borrowers
SoFi is one of the more specialized lenders out there — they focus on making jumbo loans to borrowers with good credit scores but not enough money in their savings accounts to leave a large down payment. It is one of the best mortgage lenders in NJ, but it offers its services in several other US states, as it has outposts everywhere. These are the exceptions: Alaska, Arkansas, Hawaii, Massachusetts, Mississippi, Missouri, Nebraska, New Hampshire, New Mexico, New York, Ohio, Oklahoma, South Dakota, and West Virginia.
Types of loans
You can apply for both purchase and refinance loans, and you can choose from fixed-rate mortgage loans, ARM loans, and jumbo mortgage loans. They specialize in jumbo loans, and are a little less strict when it comes to credit scores and debt-to-income ratio. As one of the very best jumbo mortgage loan lenders, they look at your financial history and disposable income more closely and place more emphasis on that rather than your raw credit score. Your career prospects will also be examined. SoFi will require you to get private mortgage insurance on conforming conventional loans where the down payments are under 20%.
Who is it for?
SoFi is perfect for borrowers who want to take out a jumbo loan. Higher-credit borrowers will have an advantage, but SoFi will consider multiple aspects of your financial health to make a decision, so you have a bit of leeway. If you have money set aside and earn a high income, you’re their perfect applicant.
According to consumer reports, the best mortgage lenders make it easy to fill out an application for a mortgage loan. SoFi definitely delivers. This all-digital approach means that once you start you’re already about 15 minutes away from finishing the process. You start by providing basic info such as your name, address, and phone number, and then you fill out some info about your current finances so SoFi can check your eligibility. You can add a co-applicant if you like.
Once you give them all the info, you enter the loan amount you need and the down payment you plan to make. SoFi will then show you a variety of loan products you can apply for and give you quotes. Select what you need, and off you go.
One of the things that makes SoFi the best mortgage company is the fact that they give you pre-approval confirmation that you can show to property sellers. You’ll have proof of your credibility when purchasing, and you can use this to get a better deal on a home.
Watch out for
SoFi doesn’t offer government-backed loans at all. If that’s something you want to apply for, some of the other lenders from our list can accommodate you.
On Official Website
- • Discounts for repeat customers
- • Fast application process
- • Great customer service
CitiMortgage is one of the best mortgage lenders for fair credit because they offer a full range of services. They give borrowers low down payment options and you can get preapproved for a loan in case the seller needs a confirmation. You can apply for a loan online, over the phone, or in person. They’ll set you up with an agent who can help you go through the process and choose the right kind of loan for your needs.
Types of loans
CitiMortgage offers all sorts of loans: fixed-rate mortgage loans, jumbo mortgage loans, ARM loans, FHA mortgage loans, and VA mortgage loans. As the best mortgage lender around, it’s available in all 50 states. They offer especially good fixed-rate loans with competitive interest rates and flexible repayment options.
Who is it for?
These are some of the best refinance mortgage lenders on the market, and anyone can apply for a CitiMortgage loan. You’ll need a fairly good credit score to get competitive interest rates, but you’ll also have a lot of flexibility in how to pay back your loan. Repeat customers will have closing cost credits and rate discounts available to them as long as they set up monthly mortgage payments from their CitiMortgage bank accounts.
The application process is very straightforward. You start by filling out the basics — the address of the property you want to purchase, contact information, income, employment status, and assets. You can sign on a co-borrower. As one of the best mortgage rate lenders, CitiMortgage gives you the option to pause the application and leave. You can save your progress by registering with a user ID and password, then resume when you’re ready. You won’t be able to close the deal online — that will require you to give them a phone call or send them an email and talk to an agent.
CitiMortgage customers get a good discount and there are plenty of low-down-payment options for customers who don’t yet have enough in their savings accounts. CitiMortgage also looks beyond your credit score. They’ll look at your overall financial health to get a good picture of your financial solvency.
Watch out for
CitiMortgage charges a mortgage application fee. You also won’t be able to close your loan before contacting their representative via phone or email. CitiMortgage also doesn’t disclose its origination fees.
On Official Website
- • Access to mortgage loan specialists
- • Close your applications online
- • Great educational resources
Excellent loan variety, expert agents to help you at every turn, and great interest rates for your loans — AmeriSave is one of the best mortgage lenders in the country. Customers get plenty of flexibility when closing an AmeriSave loan, and they’ll get some of the most competitive interest rates on the market.
Established in 2002, this company has a history of successful operations and plenty of highly professional agents who can help you get a great deal on your mortgage. They are available in 49 states and the District of Columbia, and you can contact them online, in person, or over the phone.
Types of loans
When you compare mortgage lenders, AmeriSave comes out on top because of the wide variety of loans that they offer. Government-backed loans such as VA, HARP, FHA, and USDA are on the list, and you can also apply for conventional loans such as fixed-rate mortgage loans, ARM loans, jumbo loans, and refinancing loans. You can generally talk to agents and get help in the process. They’ll be able to tailor something to suit your needs.
Who is it for?
AmeriSave is one of the best local mortgage lenders for those who are looking for a full-service provider. If you like a straightforward application process, you’ll find it here, and you can work with a team of specialists to get special recommendations for your mortgage.
You can start the application process over the phone or the online chat on AmeriSave’s website. You’ll get in touch with a licensed loan originator who can guide you through the next steps. To begin the process, select rate and term options from a dropdown menu. You can e-sign documents if you want to speed up the process.
When doing a mortgage lender comparison, AmeriSave comes out on top because of the specialized help that’s always available to borrowers and because of educational resources that you can access whenever you like. You can receive approval online without visiting the offices, and there’s a huge variety of options to choose from. AmeriSave also underwrites its loans, so you can reassure sellers that you mean business.
Watch out for
The only gripe with AmeriSave is that they don’t offer second mortgage products at all. If you need to apply for such a loan, then this is not a good choice for you.
Fortunly’s Guide to Mortgage Loans
Fixed-rate mortgage loans
Fixed-rate loans are the most conventional. They’re the default loan for most people because they are fairly straightforward: your monthly payments are always exactly the same and you know what to expect. Interest rates don’t change over time no matter what, so you can carefully plan your payments.
Each payment is equal to the interest rate times the principal, plus a percentage of the principal. You pay off small portions of the principal each month. At the start, most of your payments go toward paying off interest. At the end, you’re mostly paying off the principal.
Fixed-rate loans are available in 5, 10, 15, 20, 30, and 40-year terms; 15- and 20-year terms are the most common.
Fixed-rate mortgage loans pros:
- Payments are the same each month.
- Most fixed-rate mortgages don’t have prepayment penalties, so you can pay off your principal earlier to get more equity in your home.
- The loan is locked-in, so it’s a great option if you suspect interest rates will go up in the near future.
Fixed-rate mortgage loans cons:
- Most online mortgage lenders will offer this loan, but it’s not the best choice if you have reason to think that interest rates will drop down significantly in the future.
- You’ll pay off the principal slower than you would with an adjustable-rate loan.
Interest-only mortgage loans
With this loan, you get the option to pay only interest for the first five or 10 years, after which you start paying off principal with interest. Because of this, your payments will be smaller at first - but you won’t own any equity in your home because you’re paying off only interest.
The best mortgage lenders for first-time buyers usually offer this type of loan because it helps people who aren’t able to make bigger payments at first. If you’re a first-time buyer who expects to, for example, get a better job and earn more in five years, this could be a great option.
Interest-only mortgage loans pros:
- Low monthly payments during the first few years.
- You can apply for a larger loan amount to buy a bigger house.
- During the interest-only period the monthly payments are tax-deductible.
Interest-only mortgage loans cons:
- You earn equity at a much slower rate.
- A lot of borrowers end up unable to afford principal home mortgage rates after the interest-only period.
Adjustable rate mortgage loans
With ARM loans, the interest rate varies throughout the life of the loan. The interest rate is initially fixed, and after a certain period of time, the interest rate resets periodically. It usually resets every year and sometimes every month.
ARM loans are usually defined through numbers. For example, you could get a 2/28 ARM loan. The first number indicates the time the interest rate will be fixed, and the second number indicates the time the interest rate will float. The best online home mortgage lenders will have adjustable-rate mortgage caps, beyond which interest rates can’t rise. These loans usually start with a fairly low fixed interest rate that rises slowly after the initial period.
At the end of the fixed-interest period, the rates will raise based on a certain index plus a margin. The margins are usually tied to one of three things: the maturity yield on one-year Treasury bills, the 11th District cost of funds index, or the London Interbank Offered Rate. The margin will always stay the same even though the index can change over time. The best lenders for mortgage loans will make sure you understand all the facts before signing up.
Adjustable rate mortgage loans pros:
- Low payments during the fixed-rate period.
- Good flexibility if you intend to sell your property within five years.
- Your payments could potentially decrease.
Adjustable rate mortgage loans cons:
- Some ARMs come with a prepayment penalty.
- It’s difficult to plan around ARM loans. If you can’t make payments after the fixed-rate period, you could lose your property.
- Your payments could potentially increase.
Federal Housing Administration mortgage loans
FHA loans are made only by FHA-approved lenders. The best FHA mortgage lenders will give you the loans with a minimum down payment even if you have a lower credit score. In 2019, you can borrow 96.5% of the loan, with a down payment of just 3.5%. You generally need a credit score of 580 to apply, but you can apply even if your credit score is as low as 500 if you make a 10% down payment.
These loans are made by some of the best first time mortgage lenders. There are several types of FHA loans, but they all require you to pay two types of mortgage insurance premiums. There’s the Upfront Mortgage Insurance Premium and the Annual MIP. The UFMIP is paid when you close the loan (or you can have it rolled into the amount you borrow). The payments are deposited into an escrow account set up by the Treasury Department, and they stay there as a failsafe in case you default on your loan. The money is then used to pay back the bank.
The Annual MIP is, contrary to its name, paid on a monthly basis. Even the best commercial mortgage lenders require these payments, which usually range from 0.45% to 1.5% of the loan amount.
To apply for an FHA mortgage loan, you need a steady employment history. Bear in mind that you can apply for this loan only if you want to buy a residential property for yourself. It can’t be used to purchase property you intend to rent.
FHA mortgage loan pros:
- You can apply even with a low credit score.
- Low down payments.
- The best mortgage lenders for co-ops offer FHA loans, so you can buy property with someone else’s help.
FHA mortgage loan cons:
- You have to provide a down payment to qualify.
- You have to pay the insurance premiums, usually upfront.
- Defaults will disqualify you from applying for FHA mortgage loans.
Veterans Administration mortgage loans
VA loans are issued by the US Department of Veteran Affairs. They’re aimed specifically at US veterans, active service members, and widowed military spouses to help them purchase a home. The best VA mortgage lenders are approved for making this loan to anyone who has been honourably discharged after 90 days of service during wartime or 181 days of service during peacetime, anyone who has served in the National Guard or Selected Reserve for more than six months, or spouses of servicemen who have died in the line of duty.
This is a great loan, and if you meet the requirements for it, it should be your very first choice. There is usually no down payment required, no credit score, no private mortgage insurance payments, no prepayment penalties, and even a recent bankruptcy won’t affect your chances of getting the loan for too long. After two years have passed since the bankruptcy, you can apply.
The best mortgage lenders for VA loans will offer you plenty of flexibility with your loan, but you are limited to buying only residential property or refinancing a home. You won’t be able to purchase property to rent out. If you have some military experience but aren’t sure whether you meet the requirements for this loan, you can check here for eligibility.
VA mortgage loan pros:
- No down payment required.
- Applicants with low credit scores can be accepted.
- Low interest rates.
- No premium insurance required.
VA mortgage loan cons:
- Even the best mortgage companies conduct strict property appraisals before approving the loan.
- VA loans have something called “funding fees.” They are charged at the moment of closing, but they can be rolled into the loan. The fees usually go up if you’ve used VA loans more than once.
Jumbo mortgage loans
Jumbo mortgage loans are like regular loans, but they are used to finance expensive properties that can’t be purchased with a conventional loan. The best place to get a mortgage through a jumbo loan is usually a bank or an online lender. Conventional loans usually go as high as $484,350, and if you need more cash than that, then a jumbo loan should be your go-to.
These loans are considered riskier for lenders because they’re not guaranteed by Fannie Mae or Freddie Mac, so the lender isn’t protected if you default. You need a credit score of at least 700 and a good debt-to-income ratio to apply for this loan. You’ll also need to provide extensive documentation to prove your financial health, so prepare your tax returns, W-2s, and 1099s if you want to apply.
Even the best rated mortgage companies will ask for a sizable down payment and you’re likely to encounter higher interest rates than for a conventional loan. You could potentially lower your down payment if you pay for private mortgage insurance. Companies will put emphasis on property appraisal before approving a loan, and you might even have to go through two appraisals before getting the green light.
Jumbo mortgage loan pros:
- You can borrow more than you can through a conventional mortgage loan.
Jumbo mortgage loan cons:
- Even the best mortgage rates for jumbo loans will still be higher than conventional loan rates.
- Most lenders will require at least a 20% downpayment.
- You need a great credit score to apply for this type of loan.
- Property appraisals are strict.
Balloon mortgage loans
Balloon mortgages are the type of loans where the borrower is expected to pay the loan back in a lump sum. They typically have a short duration, and they’re usually aimed at people seeking to finance a construction project without providing collateral.
The best mortgage banks usually offer flexibility when it comes to loan repayment terms — the interest rate can be fixed or variable. Certain short-term balloon loans might require you to make principal and interest repayments when the loan matures, and there will be no amortization of the loan.
Most balloon loans are issued for durations between two and 30 years, and can be repaid early with no prepayment penalties. These loans are somewhat similar to interest-only loans because your initial installments are much smaller. Your last payment is usually huge, and that’s why it’s called a balloon loan.
This kind of loan is usually a bad idea for most borrowers, but there are some situations where it’s a great choice. For example, if you know you can count on a large inheritance in the future or a large commission, this could be a great option because it allows you to purchase your home at a lower interest rate.
When comparing mortgage company ratings, you can see that some lenders offer great conditions. If you expect your income to increase drastically or you’re looking to fund a construction project that will give you a large return on investment, this kind of loan makes sense.
Balloon mortgage loan pros:
- Lower interest rates than other loans.
- Great for people who need a short-term loan.
- Relatively easy to qualify.
Balloon mortgage loan cons:
- You might be unable to pay back your loan if things don’t pan out the way you intended.
- You have to make a huge payment all at once at the end of the term.
One of the reasons we wanted to make a list of mortgage companies is because we wanted to find the ones that offer the very best rates and the very best services to home buyers. Pick any of the lenders from our list and you’ll find competitive mortgage rates and plenty of products for any kind of borrower. A poor credit score doesn’t have to get in the way of getting a home.
To shop around for a mortgage, there are several things you need to consider: your credit score, the type of loan you need, your monthly income, your debt-to-income ratio, and the type of property you want to buy. Once you have all this info, you can browse websites and talk to banks.
You can pick the best mortgage lenders for poor credit or find excellent lenders for jumbo loans on our list, and we advise you to take your time and look over each offer carefully.
For the most part, no. Most of these lenders offer options to simply browse offers on their websites. A lot of them will do a soft pull of your credit if you decide to apply, but some of them will do a hard pull for a closer examination. Those that do a hard pull of your credit will usually notify you in advance.
Generally, yes - but your negotiating power will depend on your qualifications as a borrower. If you have a high credit score, a good debt-to-income ratio, and hefty income, the best mortgage lenders will usually go out of their way to give you a good offer.