Tips on How to Shop Around for a Mortgage Lender

By LeeMarie Kennedy · July 10, 2023 · 11 minute read

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Tips on How to Shop Around for a Mortgage Lender

Shopping for a car: fun, freeing, and full of fresh new smells. Shopping for a puppy: heartwarming and full of suspicious smells. Shopping for a mortgage: not particularly thrilling or fragrant but one of the most important decisions many consumers will make in a lifetime.

From assessing what they can afford to nailing down a mortgage type, researching the best rates, and ultimately securing a loan, homebuyers must take many steps when shopping for a home loan.

Here are a few tips and tricks on how to shop for a mortgage loan and what to expect along the way.

How to Shop for a Mortgage Lender

In order to obtain a home mortgage loan, a buyer first needs a lender. You might work directly with a financial institution, or you may find a mortgage through a mortgage broker (more on that later). Before you can research these options, you’ll need to have a sense of what you can afford to buy and borrow. Start by figuring out how much you might spend on a home and roughly what portion of that you will need to borrow.

💡 Quick Tip: You deserve a more zen mortgage. Look for a mortgage lender who’s dedicated to closing your loan on time.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Figuring Out What’s Financially Possible

Reviewing monthly spending and estimating how much they can afford is one way for mortgage shoppers to kick off the home-buying process.

A budget or worksheet can be particularly helpful in determining what’s possible, with line items for the mortgage payment, property taxes, insurance, utilities, maintenance, and funds set aside for emergencies.

A mortgage calculator is useful for estimating the real cost of a home purchase, allowing consumers to plug in and play with the factors that influence a monthly mortgage payment:

•   Loan type

•   Mortgage principal

•   Mortgage interest rate

•   Down payment amount

•   Loan term

•   Estimated property tax

•   Private mortgage insurance, or PMI

•   Homeowners insurance

•   Homeowners association (HOA) fees

Most mortgage calculators allow homebuyers to enter their credit score for a more accurate estimate. Checking your current credit score can help you determine what type of loan you qualify for.

In many cases, a higher credit score can help buyers get a lower interest rate, while a lower credit score could mean higher interest rates or the need for a larger down payment.

Knowing this information can help consumers estimate what range of quotes to expect from mortgage lenders or brokers before they start shopping for a mortgage loan.

Recommended: First-Time Homebuyer Guide

Determining the Best Type of Mortgage

Another step to take when shopping for a mortgage is deciding which type of mortgage loan to apply for.

This process could require some diligent comparison shopping to consider the pros and cons of each option alongside financial and personal needs.

Fixed-Rate Mortgage

A conventional fixed-rate mortgage offers the same interest rate and monthly payment for the entire term of the loan — typically 15 or 30 years.

Adjustable-Rate Mortgage

ARMs generally offer lower interest rates than fixed-rate mortgages, but only for a certain time, such as five or 10 years. After that, the monthly payments will adjust to current interest rates.

No Down Payment Loans

A no down payment loan allows buyers to purchase a house with zero money down at closing, except for the standard closing costs.

Federal Housing Administration Loan

An FHA loan is a government-backed loan that allows qualified buyers to put down as little as 3.5% if they meet several FHA loan requirements, including the payment of mortgage insurance.

Veterans Affairs Loan

A VA loan is a government-backed loan that allows no down payment and no mortgage insurance. It is available to eligible veterans, service members, Reservists, National Guard members, and some surviving spouses. VA loan requirements are worth looking into for buyers who fall into one of these categories.

USDA Rural Development Loan

A USDA Rural Development loan is a government-backed loan for families in rural areas who are trying to put homeownership within reach. As long as buyers’ debt loads don’t exceed their income by more than 41%, they can enjoy a discounted mortgage interest rate and no down payment.

💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

Researching Rates and Deals

Once mortgage shoppers have a better idea of their financial bandwidth and preferred mortgage type, they can begin researching the optimum rates and deals they can get on a home loan.

Mortgage lenders and brokers might offer different interest rates and fees to different consumers depending on the day, even when they have the same exact qualifications. That’s why it can be important not only to understand mortgage basics but to compare what an array of different types of mortgage lenders and brokers are able to quote in the loan estimate.

Bear in mind that mortgage lenders and brokers receive a profit from the loan issuance, so they might be motivated to get consumers to agree to loans with higher fees, interest rates, or origination points.

Shopping around for the best interest rates and deals is a proactive way for homebuyers to avoid more expensive loans and ensure they can strike a deal they’re comfortable with.

How to Shop for a Mortgage Without Hurting Your Credit

When a lender looks at your credit history and score—what is known as a “hard” inquiry—and generates a mortgage preapproval, your credit score typically takes a hit. As you shop for a mortgage, you’ll want to instead first ask for a prequalification, which requires only a “soft” credit pull and won’t negatively affect your rating. It’s important to understand mortgage prequalification vs preapproval as you move forward through the process, as there is a time for each step.

Mortgage Lender or Broker?

One decision to make when shopping for a mortgage lender is whether to work with a lender directly, or to go through a mortgage broker:

•   A direct lender is a financial institution that assesses whether a buyer qualifies for a loan and offers them the funds directly.

•   A mortgage broker is an intermediary between the buyer and financial institution who helps the buyer identify the best direct lender and compiles the information for the mortgage application.
Long story short, mortgage brokers help homebuyers comparison-shop by collecting multiple lender quotes and presenting them all at once. This can be helpful for buyers who don’t want to deal with contacting multiple lenders. That said, the broker typically takes a commission, covered by the buyer, based on the mortgage amount.

In the case of working with a direct lender, it can be a good idea for buyers to deal with a financial institution they already have a relationship with.

Questions to Ask When Considering a Lender or Broker

Sometimes a list of questions can be useful when considering whether a mortgage lender or broker is the right fit. Ask prospective lenders the following:

•   How is the lender getting paid? It’s fairly common for a mortgage broker to get paid a commission on closed transactions. Asking them whether the fee is embedded in the loan origination fee or how their compensation will be facilitated can help make these costs more transparent to the buyer.

•   Can they offer competitive interest rates? If so, how long can they lock them in? While mortgage rates tend to be standard across the industry, lender rates can fluctuate based on the buyer’s credit score and financial history. Once the rate is locked in, there’s a guarantee from the lender that they’ll stay the same for a specific period of time, regardless of industry-wide fluctuations. Finding out if the lender is willing to offer the best rate and lock it in for, say, 60 days can help buyers know that they’re covered until closing time.

•   What are the typical business hours? Whether it’s a broker or a lender, finding out their availability can be good to determine in advance, especially since many home showings and offers happen on weekends and could require a tight turnaround time.

•   Can they provide a breakdown based on different down payment amounts? It can be useful for buyers to see a wide range of cost comparisons when shopping for a loan. Can the lender provide multiple scenarios with different down payment amounts, interest rates, and fees so the buyer can have a knowledgeable conversation about their budget and what’s possible?

•   What’s the loan processing time? Asking about the anticipated turnaround time for processing the loan (usually around six weeks) can help determine whether the lender will be able to execute the purchase and sale agreement in time for closing.

•   What fees and closing costs can be expected? Inquiring about expected charges is an important way for buyers to ensure no surprises or hidden transaction fees down the line. From origination fees charged by the lender to cover the loan processing to closing costs such as home inspection and appraisal fees, HOA fees, or title service fees, a loan estimate can help lay out which charges can be negotiated and which ones are fixed.

Understanding Risks, Benefits of Loan Options

Depending on the loan type, Annual Percentage Rate (APR), whether the interest rate is adjustable or fixed, the down payment amount, and potential prepayment penalties or balloon payments, mortgages have many different benefits and risks associated with their purchase.

Working with a lender to calculate how much monthly payments are estimated at the start of the loan, five years in, 10 years in, etc., can help make clear the risks and benefits of certain terms and conditions.

A mortgage worksheet is one way to help illuminate the potential upsides and downsides of a particular mortgage loan alongside the lender.

Negotiating the Best Mortgage Deals

After a suitable sampling of lenders have provided detailed mortgage loan quotes, consumers can compare costs and terms and negotiate the best deal. The mortgage worksheet can be helpful in this part of the process as well.

Being transparent about the fact that you’re shopping around for the best quote can incite lenders and brokers to compete with one another in offering the most favorable option.

Checking With Trusted Sources Before Signing

Once comparisons and negotiations whittle the list of quotes to a few, consumers might wish to consult with reliable sources such as a family member who has experience shopping for a mortgage, a housing counselor, or a real estate attorney to weigh in on the impending agreement. Review the loan documents with a trusted, well-informed source before signing anything.

Since getting a mortgage loan is often considered one of the most expensive commitments many consumers will make in their lifetime, there’s no harm in asking for a little help when making the decision.

Getting Mortgage Preapproval

Once you’ve chosen your mortgage provider, it’s time to consider getting preapproval. While being prequalified for a loan involves consumers submitting their financial information and receiving an estimate of what the lender could potentially offer, preapproval means the lender has conducted a full review of the consumer’s income and credit history and approved a specific loan amount for, typically, 60 to 90 days. This approval usually comes in the form of a letter.

Homebuyers can benefit from getting preapproved for a mortgage in many ways. Not only does it offer them the opportunity to discuss loan options in detail with the lender, but it also helps them understand the maximum amount they could borrow.

In some cases, sharing a preapproval letter with a home seller indicates serious intention to purchase a property. This can prove particularly helpful in competitive markets and bidding wars. Sellers will often go with a preapproved buyer over a prequalified buyer, since it may help the parties get to a closing more quickly.

Shopping for a Mortgage Lender Tips

In a competitive local housing market consumers may feel pressure to line up a mortgage quickly. But it pays to do your homework when shopping for a mortgage. Evaluate your own finances, know your credit score, and then make sure you are aware of the full range of options available to you. (Remember, first-time homebuyers may qualify for special programs.) Keep good records of competing offers from potential lenders or a mortgage broker. Never hesitate to ask about all costs or request clarification of any terms you don’t understand.

The Takeaway

How to shop for a mortgage? First, figure out how much you can comfortably afford, research loan types and interest rates, then compare what lenders offer. Finding the right loan is as important as choosing the right home.

SoFi makes shopping for a mortgage loan easy and you can get your rate in just minutes.

SoFi Mortgages: simple, smart, and so affordable.


What to look for when shopping for mortgages?

You want to look for a good interest rate when shopping for a mortgage, but you also want to consider the term of the loan and fees that might affect its total cost. A loan with the lowest monthly payment initially may not always be the most affordable choice over the long haul.

Is it worth shopping around for mortgage rates?

A mortgage is one of the biggest financial decisions most consumers will make, so it’s definitely worthwhile to shop around for the best rates.

How to shop around for the best mortgage interest rate?

Shop for the best mortgage interest rate by checking with various lenders to see what rate you might qualify for based on your credit score and down payment amount. Or work with a mortgage broker who will do this research for a fee.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see Equal Housing Lender.

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Terms, conditions, and state restrictions apply. Not all products are available in all states. See for more information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.


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