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Guide to Homebuying: How to Choose a Mortgage Lender

Katie DuncanMay 9, 2022


Percentage signs forming sphere shape

Whether you’re just getting started on your homebuying journey or a few months in, you may be starting to feel the pressure of the process. From the neighborhood to the number of bedrooms to your kitchen must-haves, purchasing a house is filled with choices.

But not all of your choices will be related to the house itself! One of the first and most important decisions you’ll make is your mortgage lender.

Your lender should be more than just the financial institution that will fund the money that you need for your home purchase. They should be a partner in the entire process— which is why it is important to choose your mortgage lender wisely.

What does a mortgage lender do?

In short, a mortgage lender is a financial institution that offers, underwrites, and lends home loans. They help borrowers through the loan application process and, using information like your credit score, decide whether or not you are qualified to take out a loan. They’re responsible for setting the terms of the loan, including the maximum amount that they will lend you, as well as the interest rate.

They’ll also help you with things in the home buying process like arranging for a home appraisal and guiding you through closing. After you buy your home, your lender will also be the one to manage your repayment process for the life of the loan.

And every step of the way, they should be there to help you answer any questions you may have.

Meet our team and get started.

Our local, award-winning lending team is ready to help you begin today.

How to Choose a Mortgage Lender

We know they’re an important part of your homebuying team— so how do you choose the right lender? Here are some things to consider.

The Local Lender Advantage

Before you choose a particular lender, you’ll need to narrow down what type you’re looking for.

First, there are your large financial institutions. These are nationwide conventional banks that have branches across the county. Next are your online lenders. An online lender may operate partially or completely online, meaning you likely won’t find a brick-and-mortar location. Last— but certainly not least— are local lenders.

Under the local lender category, you’ll find credit unions and smaller banks. Though they may not have the name recognition of larger banks, borrowing from them comes with several distinct advantages.

1. You’ll get a personal touch.

To large banks and online lenders, you are probably just a number. With a local lender, you can expect personalized customer service. You can meet with representatives face to face if you have questions about next steps or need to resolve an issue.

A personal relationship can help with more than just customer service, though. Not all borrowers fit in the box that large lenders tend to easily approve for a mortgage. For instance, you may be a freelancer with fluctuating income. A large lender may automatically deny you. A local lender can go above and beyond to work with you to get approved.

2. They know the local market.

Small institutions know the markets they operate in. They have relationships with local professionals like inspectors, appraisers, and other figures in the homebuying process. By working with nearby professionals, you ensure that your appraisal is accurate and true to the local housing market.

3. You may get a better interest rate.

Local lenders are known for offering great interest rates on loans. Credit unions, which are not-for-profit financial institutions, can often save borrowers thousands of dollars over the course of their loan.

This varies per institution, so be sure to do your homework and compare rates! Remember: your mortgage involves a lot more than the interest rate. Be sure to ask questions about all potential costs.

4. A prequalification from a local lender may make you more competitive.

Seasoned real estate agents will often recommend their clients go with a local lender. Because they know the area and deal with a smaller clientele base, agents and sellers trust local lenders to close in a timely manner. A local lender might make the difference between having your home offer accepted or having it rejected because you’re using a big-box lender.

5. You reinvest in your community.

By borrowing from a local credit union, you help your new community. This is because one of the pillars of credit unions is community reinvestment. For example, Amplify Credit Union is committed to contributing and volunteering to three local Central Texas organizations: Saint Louise House, the American Red Cross of Central & South Texas, and Caritas of Austin. Choosing a local financial institution can enrich your community.

What to Look for in a Mortgage Lender

Even if you decide to go with a local credit union or bank, it’s important to do your research to find the right mortgage lender for your needs.

The best way to do this is to find three to five lenders and learn more about their loan offerings. Ask about what kinds of loans they offer and whether or not they participate in programs such as FHA loans, USDA loans, and more. It also helps to get a loan estimate from each one. You’ll want to look at several factors, including:

  • Interest rates and monthly payment amounts
  • Fees
  • Closing costs

This is also a good time to get a feel for the customer service from each bank. Does the staff seem helpful? Do they truly want to help you purchase a home? Are they easy to get a hold of if you have questions?

From there, compare each credit union or bank to find the one that has the lowest rates or offers the best mortgage loan for your home buying situation.

After You Find Your Mortgage Lender

After you’ve found your lender, the next step is to get prequalified or preapproved for a home loan. Prequalification is a useful tool that can help you determine your budget and can also improve your chances of getting your offer accepted by a seller.

Prequalification demonstrates two things. For one, it shows that a mortgage lender has looked over your financial record and believes that you are likely to be approved for a mortgage when you actually apply. Agents and sellers are more likely to take you seriously as a buyer if you come in with a prequalification. Secondly, it provides a ballpark estimate of how much a mortgage lender will loan you, which can help formulate your budget.

Explore Local Mortgage Lenders

Ready to start looking for a local mortgage lender? Start your search with Amplify Credit Union. Whether you are a first-time home buyer or are on the hunt for your forever home, our mortgage loan officers are ready to help find the mortgage that best fits your needs.

Ready to get prequalified?

Apply today and start your journey toward your new home.

Katie Duncan

Katie Duncan is a financial writer based in Austin, Texas. Her articles include financial advice for freelancers, homebuyers, and more. When she’s not writing, Katie loves traveling and exploring the outdoors with her friends and her dog, Poe.