Looking for a lender? Start here
If you’re thinking about buying a new home or refinancing, you’re probably wondering which mortgage companies offer the best options.
Thanks to the recently released J.D. Power 2020 U.S. Primary Mortgage Origination Satisfaction Study, you’ll have a strong jumping-off point for your search.
With a mix of tech-first lenders and major banks earning the highest ratings, there are a variety of options to choose from.
But don’t limit your search. Just because a mortgage company gets good reviews, doesn’t mean it’s the best company for you.
You still need to compare rates and fees from at least 3-5 lenders to make sure you’re getting the best deal in addition to great customer service.Get matched with a lender (Dec 3rd, 2020)
The top-rated mortgage lender for 2020 is…
At the top of J.D. Power’s list are some of the nation’s mega lenders:
Rocket Mortgage by Quicken Loans took home J.D. Power’s top rating for the 11th year in a row.
Rocket and its parent company Quicken receive high marks from borrowers for their quick and easy online application and customizable loan features.
In addition to being a leading lender for FHA and VA loans, Rocket Mortgage says it can provide a pre-approval decision in eight minutes.
But Rocket and Quicken’s winning track record doesn’t mean this is the best mortgage lender for everyone.
To find the right mortgage lender for you, you need to do some homework.
Start by figuring out what type of loan you need. Then, compare rates and fees from a few different lenders that seem promising.
You might be surprised at which one can offer you the best deal.
Don’t miss the top mortgage lenders for veterans and service members
J.D. Power’s list primarily includes lenders that work with a broad range of consumers.
But if you look at the fine print, you can see that military service members and veterans have additional options.
In fact, the top military lenders consistently rank even higher than Quicken Loans for customer satisfaction. Only, they don’t show up at the top of the list because they’re not available to most borrowers.
This year’s top-rated mortgage lenders for military service members and veterans are:
These lenders specialize in VA loans, which allow zero down payment and often have below-market interest rates for eligible service members.
Looking for a veteran-focused lender can also be a good idea if you have a rocky credit history or higher debts, and you want to work with a lender who can offer additional counseling or assistance to help you qualify for a mortgage.
Many military lenders (though not all) have special programs to help VA-eligible borrowers become homeowners.
If you plan to apply for a VA loan, you can compare the top VA lenders and request quotes from several to see who offers the most competitive rates and terms.Get matched with a VA loan lender (Dec 3rd, 2020)
How to choose a mortgage lender
When thinking about how to find a mortgage lender, ratings can be a great place to start. If millions of other homeowners are singing a lender’s praises, it’s probably worth checking out.
But rankings are just that — a place to start.
The right lender for you might not be one of the national banks or even appear on a best-of list.
You might be better off looking at local banks or credit unions that are hands-on throughout the loan process or who will work with you to help you qualify for a mortgage.
That’s especially true if you think you’ll have trouble qualifying for a home loan — maybe because you have a lower credit score, high debts, or non-traditional income.
Whatever the case, it’s crucial to find a lender that knows how to work with borrowers like you and can offer low rates for your situation.
Think about your unique needs
There are a number of factors that influence whether a lender will approve you for a loan.
Sometimes a smaller company has more bandwidth to help borrowers who have low credit scores or a limited credit history.
Lenders may also specialize in a particular type of loan or may work primarily with a certain type of borrower.
- Some are known for doing jumbo mortgages, which exceed the loan amount guaranteed by the government
- Others work with bad credit or self-employed borrowers who might have a hard time qualifying for a mainstream loan
- Still others do a large number of FHA, VA, or USDA loans and can offer expertise in those areas
What’s your borrower profile?
Understanding what your profile as a borrower looks like may help you choose the right lender for your circumstances.
Here are some of the biggest factors mortgage lenders look at:
- Credit score: The higher your score, the more home loan options you’ll have. However, some loan programs accept credit scores in the 500s and low 600s, and your score is only one part of the evaluation process
- Debts: Lenders calculate all of your other debts plus your potential mortgage payment against your monthly income (this is known as your debt-to-income ratio) to determine how much you can afford
- Income: Your income can also affect the types of loan programs you qualify for. USDA loans, for example, cap income at 15% above the local median. Income might also determine whether you qualify for down payment assistance programs, and not all lenders allow borrowers to use those toward their loans
- Down payment: If you can put down 20% or more, you can avoid paying private mortgage insurance (PMI). But many lenders offer loans with as little as 3% down. FHA loans require just 3.5%, and VA and USDA loans allow 0% down
Before requesting quotes from any lenders, compile a short list of mortgage companies that seem like they’d be a good fit. Then research whether they offer the type of loan you’re looking for.
Many lenders will list the loan products they provide on their websites, and some will highlight special programs for first-time home borrowers or low credit applicants.
If you’re still not sure which lenders are best, you can ask your real estate agent for recommendations.
You might also consider hiring a mortgage broker. A broker identifies loans that work with your circumstances, as well as lenders that offer those products.Verify your mortgage eligibility (Dec 3rd, 2020)
How to compare mortgage rates and fees
It’s a good idea to request mortgage quotes from several lenders so you can compare them side by side.
While interest rates will factor into your decision, there are a number of other aspects to consider, including:
- Closing costs: How much can you expect to pay in fees, appraisals, origination costs, and other expenses?
- Loan products: Do they offer mortgage options that suit what you’re looking for and what you can afford in terms of a down payment?
- Servicing: Does the lender service your loan after it closes — meaning they handle account management and payments — or do they sell it to another company?
- Special programs: Does the lender allow down payment assistance or do they offer loans designed to help first-time home buyers?
- Application process: Is the application process 100% online or do you work with a loan officer from approval to closing?
As you get a sense of how different mortgage companies interact with borrowers, and the terms and products they offer, it will become easier to identify the lender that best suits your needs.
A look back at the 2020 mortgage market
Historically low interest rates sent home sales soaring to a 14-year high this year, and refinances are up 200%.
Many homeowners and buyers rushed to lock in rates at 3% or less while they lasted, which proved to be a smart move, as rates increased following President-elect Joe Biden’s win.
The Federal Reserve has said rates will remain low until 2023, though. So, you get can still get a great interest rate if you haven’t bought or refinanced yet.
Low rates caused snags in the mortgage process
Despite skyrocketing sales, the mortgage industry has had its fair share of issues in 2020.
J.D. Power reported that the spike in mortgage demand led to increased loan processing times, as well as problems with self-service application options.
The organization also noted that lenders struggled to cope with the influx in applications and increased current borrower inquiries, particularly with so many employees forced to work from home.
What to expect from mortgage lenders in 2021
Lenders will likely try to course-correct moving into 2021 in order to remain competitive, according to J.D. Power.
If you’re concerned about hitting snags with online application programs, or you’re hoping to move quickly on your loan application, contact the lenders you’re considering and ask about their turnaround times for loan decisions.
You can also ask about their average time to close on a loan, as well as their customer support options for their online tools.
Getting a sense of how they handle potential issues can help you feel more confident when selecting a lender.