Before you start shopping for a home, it is essential to get pre-approved by a lender. This does not mean that you cannot keep "shopping around" for the best loan while you look at homes. Once you have a signed (or "ratified") contract, you will need to choose a lender, submit a formal application and many times pay a fee (usually the cost of the appraisal) to the lender.
So, how do you choose the right lender?
It is important to choose a reputable lender, but also one that has the right loan program to fit your particular situation. It is important to carefully compare rates, origination and processing fees, terms, conditions and restrictions before making a final decision.
Some lenders are very conservative and are only competitive with loans for customers with above-average credit scores and low loan-to-value (LTV) ratios (low risk loans). Others are more flexible and will consider applicants who have less-than-perfect credit history (higher risk loans).
Some have a central underwriting location and may need extra time to process your application, others do their underwriting locally. Mortgage brokers generally have access to many lenders and may have products that banks cannot offer, but their fees may be slightly higher, and they may have less control over the process.
The ordinary consumer interacts with only a few mortgage lenders over a lifetime, but REALTORS® deal with mortgage lenders every day. Ask you REALTOR® to recommend some mortgage lenders, and to help you decide which offering best suits your individual needs.