Choosing a mortgage lender is a critical decision that can significantly impact your financial well-being for years. Given that different lenders offer varying terms and fees, it’s essential to shop around, compare your options, and ask questions. Research indicates that getting just one additional rate quote could save homebuyers an average of $1,500 over the life of the loan, and securing five more quotes could save approximately $3,000.
Deciding on Your Mortgage Type
Before you even start reaching out to lenders, it’s crucial to determine which type of mortgage aligns best with your financial situation and goals. The two primary categories are:
- Fixed-rate mortgage: The interest rate remains constant throughout the life of the loan, providing predictable monthly payments.
- Adjustable-rate mortgage (ARM): The interest rate is fixed for an initial period, then adjusts periodically based on market indices. These can offer lower initial payments but carry the risk of future rate increases.
For instance, as of Monday, July 21, 2025, the average 30-year fixed mortgage APR in Houston, TX, is around 6.840%. The average 15-year fixed mortgage APR is about 5.896%, and the average 5-year adjustable-rate mortgage (ARM) APR is approximately 7.373%. These rates can fluctuate, so comparing them on the same day is important for accuracy.
Home Loan Shopping Tips
Here are six key tips to guide you when shopping for a mortgage lender:
- Get Quotes from Multiple Lenders: Aim to get quotes from three to five different lenders to discuss your mortgage options thoroughly. This broadens your comparison pool and increases your chances of finding the best deal.
- Consider All Types of Lenders: Don’t limit your search to just one type of institution. Obtain estimates from loan officers at traditional banks, local credit unions, independent mortgage brokers, and non-bank lenders. Each has its own advantages and may offer different rates or products.
- Compare Loans on the Same Day: Mortgage rates change frequently, sometimes even multiple times within a day. To ensure an accurate comparison of loan estimates, try to gather all your quotes on the same day.
- Shop for a Loan Within a 45-Day Period: To minimize the impact on your credit score, complete all your mortgage shopping within a concentrated period, ideally 45 days. Credit bureaus generally treat multiple credit inquiries for a mortgage within this timeframe as a single inquiry, recognizing that you are rate shopping. Inquiries outside this window could potentially lower your credit score more significantly.
- Compare All Loan Terms, Not Only the Mortgage Rate: The lowest interest rate doesn’t always translate to the best overall deal. You must consider the total cost of the loan. Carefully examine:
- The APR (Annual Percentage Rate): This reflects the true annual cost of the loan, including the interest rate, mortgage points, and other lender fees.
- Mortgage Term: The duration of the loan (e.g., 15, 20, or 30 years), which impacts your monthly payment and total interest paid.
- Lender Fees: This includes application fees, processing fees, loan origination fees, and closing costs (also known as settlement fees). Ask each lender for an itemized summary of estimated fees to clearly understand and compare costs. After you submit an application, the lender is legally required to provide you with a Loan Estimate document detailing these terms and costs.
- Ask Questions if You Don’t Understand Loan Features: Do not hesitate to ask your lender for a full explanation of any loan program or feature that you don’t fully understand. Being well-informed is key to making a confident decision.
For additional objective advice and guidance, consider working with a HUD-certified housing counseling agency. These counselors can serve as objective advisors, helping you weigh the pros and cons of various lenders and mortgage options.