Best Mortgage Lenders for First Time Home Buyers

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Ready to buy your first home? Have you learned everything you can about how to save for a house? Once you’ve determined the type and location of home you want to buy, you don’t want to miss out on finding a reliable lender that can offer you preapproval. Here’s how to take the next step and find the right lender for you.

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The Best Mortgage Lenders for First Time Home Buyers:

What to Look for in a Mortgage Lender

Lenders must meet all licensing requirements to operate in your state before issuing you a loan. The NMLS Resource Center is a gateway to the Nationwide Multistate Licensing System and Registry (NMLS), which offers information on licensing requirements for each state. From here, you can also find a link to your state’s website, where you can look up licenses for authorized lenders. Here are some things to look for in a mortgage lender:

  • Virtual lender versus brick-and-mortar location.This is simply a matter of preference. Would you rather do everything online or do you like the idea of talking to someone one-on-one every step of the way?
  • Credit union versus other lenders. A credit union is a nonprofit institution with the goal of providing loans and banking services to members. This setup you may sometimes get better rates than with another type of institution.
  • Existing memberships. Take a look at your current memberships. Your bank may offer a special deal to account holders. If you qualify for a credit union membership through your employer, check into their rates, as well, and compare them to what other lenders are offering.

It’s also important to try to save on interest rates and fees. Here are a few tips to help save you money as you’re shopping for a loan.

  • Mortgage interest rates are calculated as an annual percentage rate, or APR. An APR includes the fees the lender charges, while the interest rate is simply the percentage of the principal the lender plans to charge you for the loan, without those extra fees added. Even the smallest percentage you can save up front can add up over the years you’re paying on the loan.
  • Before you start shopping, research interest rates so that you’ll know where an offer stands in comparison to the average. The Consumer Financial Protection Bureau provides a tool that lets you see averages for your state, loan type and credit score level.
  • When you close on your house, you’ll see a list of fees, called closing costs. Closing costs are the fees charged by the lender and closing team to process your purchase. Check with each lender to ask what those fees will be.

There are also numerous programs that can help save you money, especially as a first-time homebuyer. With this initial purchase, you’ll have access to programs that can help with closing costs and more affordable rates. Look for a lender that works with these programs.

The government can also help you, not only with your first purchase but with subsequent purchases. The Federal Housing Authority backs loans to consumers to help keep the economy strong. Shop for a lender that offers FHA loans and price their rates in comparison to what you’d pay for a conventional loan. If you’re a veteran, you may also qualify for a VA loan, which can offer numerous benefits not available to non-veterans. Since not all lenders offer these options, though, you may have to broaden your search.

Here are a few other things to consider as you shop for a loan.

  • If you’re working on a short timeline, you’ll want to factor this into your decision. Many lenders will say to allow at least 30 days, but if you’re moving to a new city or the seller wants to finalize things quickly, it could be to your advantage to work with a lender who can speed that process up.
  • Some lenders offer instant pre-approval online, while others require a more involved process. Although instant approval can be convenient, there are benefits to being able to drop documents off in person, including the ability to work with someone to answer the question, how much house can you afford?
  • One of the best ways to get a feel for a lender’s customer service is to read reviews from existing customers. In addition to being available to borrowers, a lender should also have a reputation for delivering documents on a timely basis and communicating important information.

5 Tips for Finding the Best Mortgage Lenders

You can save money by tracking down the right lender, but it will require a little shopping around. Here are five fast tips to help you find the best lenders.

  1. Before beginning your search, pull your credit report and know your own credit score. You can obtain one free credit report each year from each of the three credit bureaus. If your score is below 580, you’ll need a 10% down payment to qualify for an FHA loan.
  2. You can choose between a large, corporate lender or a small, local bank. There are also credit unions and online lenders. If you want a more personalized lending experience, go for a credit union or local lender, but make sure you compare their rates to those being offered by larger institutions.
  3. In addition to expert recommendations, make sure you check in with local friends and relatives. They’ll be able to help you narrow down the list of lenders in your area.
  4. This is the time to get the best deal. Research several lenders and narrow it down to the best offer.
  5. The U.S. Department of Housing and Urban Development (USDA) lists mortgage assistance programs by state, which can help you narrow your lender search to those who participate.

The 7 Best Mortgage Lenders for First-Time Homebuyers

You might be eager to start house shopping but it’s important you take your time finding a lender. An FHA loan may be a better option for you, but some lenders only offer conventional loans. Here are 7 of the best mortgage lenders for first-time homebuyers.

1. Rocket Mortgage: Best Overall

Rocket Mortgage by Quicken Loans offers you a quick and easy way to get preapproved.

When you’re in the research phase, this can be a big help. However, as a first-time homebuyer, you may prefer an in-person application experience.

Still, it can’t hurt to see what type of deal you can get from an online lender. Rocket Mortgage offers conventional, FHA, USDA and VA loan options with rates that are lower than average.

2. Wells Fargo: Best for Lower-income Applicants

Wells Fargo offers the Your First Mortgage program, which allows 3% down payments if you choose a fixed-rate mortgage. The flexible income guidelines may also help you qualify if you struggle to meet the debt-to-income requirements set by lenders. You may also qualify for help with your closing costs if you attend one of Wells Fargo’s homebuyer education courses.

The current interest rate on a 30-year fixed-rate mortgage is lower than average. In addition to conventional loans, Wells Fargo offers FHA and VA Loans, as well as participation in government-sponsored programs like USDA Guaranteed Rural Housing Loans.

3. Bank of America: Best for Help with Upfront Costs

In order to purchase a home, you’ll at least have to pay a minimal amount at closing, known as the down payment. That rate can be as high as 20 percent, which may be tough for a first-time homebuyer.

Bank of America offers special programs for homebuyers who have a qualifying credit score and income, including America’s Home Grant® program, which provides up to $7,500 in closing cost assistance.

Bank of America offers conventional, FHA and VHA loans, with rates for 30-year-fixed loans that are lower than some competitors.

4. SunTrust: Best for Customer Service

Both before your pre-qualification and long after closing, you can contact a mortgage specialist to discuss any questions or concerns. SunTrust offers extended service hours through its hotline. You’ll also have access to a wide range of loan assistance programs, including Fannie Mae’s HomeReady® and Freddie Mac’s Home Possible® financing programs for lower-income homebuyers.

SunTrust offers conventional, FHA, VA and USDA Rural Development loans, with interest rates for conventional loans that are lower than competitors.

5. CitiMortgage: Best for Member Discounts

If you have an account with Citibank, you should request a quote from their mortgage department.

Citi Mortgage Relationship Pricing provides discounts on interest rates and closing costs based on the amount of your account balance at the time of application.

Interest rates for 30-year fixed loans are higher than some competitors, but Citi offers conventional, FHA and VA loans, as well as a HomeRun program that can save money for those who qualify.

6. Veterans United: Best for VA Loans

If you’ve logged some time in the military, Veterans United’s loans will likely be the best deal. Unlike other veteran-marketed loan programs, Veterans United only accepts active duty and veteran military members.

In addition to no-down-payment loans, you’ll also eliminate the private mortgage insurance you’ll have to pay with other mortgages.

Veterans United is also more forgiving of lower credit scores. Interest rates are lower than average.

7. Luxury Mortgage: Best for Self-Employed

Luxury Mortgage makes it easy for all types of homebuyers to get approved for a mortgage. Their flexible requirements can help you get financing, with no employment or income verification and no minimum DTI. Luxury Mortgage offers traditional loan terms, as well as more flexible home payment plans with their 40-year loan program.

It’s also easier to get approved if you’re self-employed. Tax returns are not required and you’ll only need one year of self-employment income history and a minimum credit score of 580. Luxury Mortgage can also help you get approved on assets alone, like your bank statements, stocks and bonds, or retirement accounts.

Choose the Best Mortgage Lender for You

Even a small interest rate savings on the front end can make a difference in the amount you’ll pay over the course of your loan. It’s important to think about the money you’ll save over the course of your time in the house as you shop around. Compare each lender to make sure you lock in the best terms. As a first-time homebuyer, you’ll qualify for savings that previous borrowers can’t access, so try to take advantage of these programs where you can.

When it comes to borrowing money for a large purchase, you know better than anyone what you can afford and where your credit score and income stand. Pulling your credit report and knowing your creditworthiness will help you find a lender for your situation.

Frequently Asked Questions

1) Q: How do I get pre-approved?

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1) Q: How do I get pre-approved?
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First, you need to fill out an application and submit it to the lender of your choice. For the application you need 2 previous years of tax returns including your W-2’s, your pay stub for past month, 2 months worth of bank statements and the lender will run your credit report. Once the application is submitted and processed it takes anywhere from 2-7 days to be approved or denied. Check out our top lenders and lock in your rate today!

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2) Q: How much interest will I pay?

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2) Q: How much interest will I pay?
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Interest that you will pay is based on the interest rate that you received at the time of loan origination, how much you borrowed and the term of the loan. If you borrow $208,800 at 3.62% then over the course of a 30-year loan you will pay $133,793.14 in interest, assuming you make the monthly payment of $951.65. For a purchase mortgage rate get a quote here. If you are looking to refinance you can get started quickly here

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3) Q: How much should I save for a down payment?

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3) Q: How much should I save for a down payment?
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Most lenders will recommend that you save at least 20% of the cost of the home for a down payment. It is wise to save at least 20% because the more you put down, the lower your monthly payment will be and ultimately you will save on interest costs as well. In the event that you are unable to save 20% there are several home buyer programs and assistance, especially for first-time buyers. Check out the lenders that specialize in making the home buying experience a breeze.

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