Purchasing a home is one of life’s most significant milestones, but it often comes with a hefty dose of stress and confusion, especially when navigating the intricacies of securing a mortgage. CNBC Select recognizes the challenges you face and is here to help. In this comprehensive guide, we’ve curated a list of five top mortgage lenders to streamline the home loan application process and ensure you find a lender that aligns with your unique needs. We’ll delve into various aspects of these lenders, including loan options, customer support, and minimum down payment requirements, as well as provide a detailed methodology (see below).
However, before diving into lender recommendations, it’s essential to understand crucial factors when applying for a mortgage. Mortgage interest rates, for instance, can fluctuate frequently, making it vital to grasp that your rate hinges on factors like your location, credit score, and credit report. While lender websites offer insights into interest rates, the most accurate rate estimate can be obtained by providing your essential information for a rate check.
Moreover, the mortgage approval process entails various fees, collectively termed “lender fees.” Some lenders may offer fee waivers or discounts, but it’s crucial to be prepared for these additional charges when progressing with a specific loan.
This guide aims to empower you with the knowledge needed to make an informed decision, whether you’re a first-time homebuyer or investing in property. While homeownership comes with a learning curve, our FAQ section below will help familiarize you with essential aspects of the mortgage process.
Understanding the Lenders
- Rocket Mortgage
- Who’s this for? Rocket Mortgage stands as one of the largest mortgage lenders in the United States, renowned for its accessibility. While most lenders set a minimum credit score of 620, Rocket Mortgage accepts applicants with credit scores as low as 580 for select loan options. They even offer the Fresh Start program, designed to help applicants boost their credit scores before applying. However, lower credit scores may lead to higher interest rates.
- Loan Variety: Rocket Mortgage offers a range of loans, including conventional, FHA, VA, and jumbo loans. However, they do not provide USDA loans. Construction loans and HELOCs are also not in their offerings. Nonetheless, if you’re looking to purchase a single-family home, a second home, or an existing condo, Rocket Mortgage should suit your needs.
- Flexible Terms: Rocket Mortgage provides flexible loan repayment terms, extending up to 30 years.
- Chase Bank
- Who’s this for? Chase Bank caters to homebuyers seeking lower down payment options. They offer the DreaMaker loan, allowing down payments as low as 3%, making homeownership more accessible. However, income requirements for this loan are stricter, requiring applicants’ income not to exceed 80% of the Area Median Income (AMI).
- Loan Variety: Chase offers conventional, FHA, VA, and jumbo loans but does not provide USDA loans or HELOCs. Their minimum credit score requirement is 620 for mortgage options.
- Additional Benefits: Chase offers discounts for existing customers, though the requirements are relatively high. For instance, having $500,000 or more across Chase deposit and investment accounts can yield up to $1,150 off the processing fee. They also provide comprehensive resources, including online customer support, mortgage calculators, and educational articles.
- Ally Bank
- Who’s this for? Ally Bank stands out by not charging lender fees like application, origination, processing, and underwriting fees. They offer a HomeReady mortgage program, ideal for low-to-mid-income homebuyers, allowing down payments as low as 3%. Applicants must meet specific debt-to-income and income criteria.
- Loan Variety: Ally Bank offers HomeReady mortgages and jumbo loans but does not provide FHA, VA, or USDA loans. Borrowers can choose between fixed-rate and adjustable-rate mortgages, with terms spanning 10 to 30 years.
- PNC Bank
- Who’s this for? PNC Bank caters to a diverse clientele, offering USDA loans, conventional loans, FHA loans, VA loans, jumbo loans, and a special program for medical professionals. This program allows medical professionals to apply for up to $1 million without paying private mortgage insurance (PMI).
- Loan Variety: PNC Bank offers a wide array of loan options, including USDA loans, which can be rare among lenders. They also provide fixed-rate and adjustable-rate terms.
- Application Flexibility: PNC Bank offers both online and in-person mortgage application processes, making it accessible to a broader audience. The minimum credit score requirement is 620 for their mortgage options.
- Who’s this for? SoFi offers attractive discounts for cost-conscious homebuyers. You can receive a 0.25% discount on a 30-year conventional loan and up to $9,500 cash back when purchasing a home through the SoFi Real Estate Center.
- Loan Variety: SoFi provides conventional loans, jumbo loans, and HELOCs, but does not offer FHA, VA, or USDA mortgage loans. Borrowers can choose between fixed-rate and adjustable-rate mortgages, with terms ranging from 10 to 30 years.
- Additional Resources: SoFi offers a range of resources, including home affordability calculators and mortgage calculators, aiding in budgeting and planning for renovations.
- What is Pre-Approval and How Does it Work? Pre-approval is a formal statement or letter from a lender that specifies how much money you can borrow for a home purchase and the corresponding interest rate. It involves providing documents like bank statements, pay stubs, tax forms, and employment verification. Pre-approval empowers you to start viewing homes and making offers with confidence. It’s advisable to seek pre-approval at the outset of your home-buying journey.
- How Do Mortgages Work? A mortgage is a loan that facilitates home purchase by allowing you to pay a portion of the property’s cost upfront (usually 3% to 20%) and repay the rest over an agreed period, often 15 or 30 years, along with interest. If your down payment is less than 20%, you may also have to pay private mortgage insurance (PMI) until you’ve built 20% equity in your home.
- Where Do You Get a Mortgage? Mortgages are available from various sources, including credit unions, traditional banks, and online lenders. Different types of mortgages are offered, such as conventional, FHA, VA, and more. Exploring lenders and their programs, along with considering fixed-rate or adjustable-rate mortgages, is essential to finding the right fit.
- What Is a Conventional Loan? A conventional loan is funded by private lenders and later sold to government-sponsored enterprises like Fannie Mae and Freddie Mac. It’s a common loan type, often allowing down payments as low as 3% or 5%.
- What Is an FHA Loan? An FHA loan is a government-backed mortgage that offers more lenient requirements, including lower credit score and down payment requirements (usually 3.5%). It’s an accessible option for many homebuyers.
- What Is a USDA Loan? A USDA loan, backed by the U.S. Department of Agriculture, is designed for rural area home purchases, offering a 0% down payment option.
- What Is a VA Loan? A VA loan, provided by the U.S. Department of Veterans Affairs, benefits service members, veterans, and their spouses, offering a 0% down payment requirement and no need for mortgage insurance.
- What Is a Jumbo Loan? A jumbo loan exceeds the conforming loan limit for the area where the property is located. These loans typically have stricter credit score and debt-to-income ratio requirements.
- How Is My Mortgage Rate Decided? Mortgage rates fluctuate based on market conditions, such as inflation and the overall economy. The Federal Reserve’s actions can influence rates indirectly. Your specific rate depends on factors like location, credit report, credit score, and lender policies. Higher credit scores often result in lower mortgage rates.
- What Are Mortgage Closing Costs? Mortgage closing costs include various fees beyond the down payment, such as origination, processing, application, and underwriting fees. Other costs may involve document preparation, appraisal, title search, and title insurance.
- What Is the Difference Between a 15-Year and a 30-Year Term? A 15-year mortgage allows you to pay off the loan in 15 years with higher monthly payments but less interest paid over the life of the loan. In contrast, a 30-year mortgage offers lower monthly payments but more interest paid due to the extended term.
- Do Mortgage Lenders Have Better Rates Than Banks? Mortgage rates depend primarily on your financial profile and market conditions. Both lenders and banks offer competitive rates. It’s advisable to obtain quotes from multiple sources and potentially negotiate for the best rate.
- What Is the Easiest Type of Mortgage to Get Approved For? Government-backed loans like FHA, VA, and USDA loans often have more lenient approval requirements, making them accessible to borrowers with lower credit scores or unique circumstances.
- Is It Better to Go with a Local Bank for a Mortgage? Local banks may offer relationship discounts to existing customers, potentially reducing your mortgage costs. If you’re already a customer at a local bank, inquire about such discounts.
This comprehensive guide equips you with the knowledge needed to navigate the intricate world of mortgages. It empowers you to make informed decisions, find the right lender for your needs, and ultimately achieve your dream of homeownership. Remember that the mortgage process can be complex, but with the right information and guidance, you can confidently embark on your home-buying journey.