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Did you plan to purchase a dream house in 2023? Or, did you postpone the goal because of the pandemic which hit the world so hard economically? If so, is your plan still on in 2023, especially now that the year is ending too? According to one survey in the U.S., most people hope to buy houses even in the face of rising prices. What about you? If you’re still interested, then it should be a perfect idea to consider this blog. It will focus on the best mortgage lenders in 2023 from which you can source finance to buy that house. It will also focus on what lenders look for before giving a mortgage, how the mortgage process works, and how to select the right lender.
What Is a Mortgage?
So many people confuse the word “mortgage” with being a type of house someone lives in, like bungalows and mansions. But what is a mortgage? It is a loan from a bank or other lender used for purchasing or refinancing a home. It is a secured loan; the property you acquire acts as collateral during the loan repayment process. If you fail to repay, the lender will take your home. The home usually is not entirely yours until the mortgage is paid off.
How The Mortgage Process Works:
The process depends on whether someone is buying or refinancing a home. The significant steps of getting a mortgage for a home purchase are as below; –
- Submission of the mortgage application. You can make an official application at the lender’s premises or apply online. You will fill in a complete application and give out the appropriate documentation.
- Your estimate processing. Next, you will wait for your loan estimate, which the lender needs to provide within three business days after a successful application. The estimate will include the expected interest rate, monthly installments, and closing costs.
- Scheduling a home inspection. Get to inspect the home of your choice immediately after receiving the document above so that you can get sufficient time to negotiate with the seller if a problem arises.
- Pay for and organize a home appraisal. You can ask the lender to assist you with an appraiser you can use.
- Buying a homeowner’s insurance. This is a must-have requirement before your loan can get approved.
- The waiting time/period. This is the time in which your loan is prepared for underwriting.
- Begin the underwriting process. This can take between a few days and a few weeks, and underwriters can either approve or decline loans manually or automatically.
- Reviewing the closing disclosure. The closing disclosure is usually available for your review at least three working days before signing the mortgage documents. It’s best to compare the disclosure thoroughly with the most recent loan estimate from the lender to avoid missing any significant changes.
- Loan closure. This is the final stage when all the parties involved in the mortgage transaction sign the required documents.
2023 Best Mortgage Lenders
Here are some of the top 2023 mortgage lenders you might want to consider:
1. CMG Financial
This is a perfect lender, especially for first-time homebuyers. It offers loans like conventional, jumbo, and HomePossible. You can have several loan options to consider when you decide to go with this lender. It also uses a mobile app that makes document upload easy and has several ways to apply. It is also an excellent choice for jumbo loans as it provides loans up to $5 million and down payments of as low as 10%.
While saving for a deposit is one of the most challenging facets of home purchase, more so for new buyers, CMG Financial provides two ways to help overcome it. One is called HomeFundIt, a crowdfunded down payment program that gives up to $1,500 toward the closing costs. The other is called Freddie Mac’s BorrowSmart program, which offers up to $1,500 toward the down payment.
2. LoanDepot
For cash-strapped borrowers, this is the best lender for you. It provides FHA 203(k) loans for homebuyers without the cash for a fixer-upper. It uses a technology that can help determine the loan alternatives that will most money and allow you to close the fastest. The technology can also remove the need for appraisal in some instances, hence, saving a borrower a few hundred dollars. Some of the advantages include; – digital income and assets verification, no lender fees for those who later refinance with them, and the loan process closing after eight days.
3. PNC Bank
PNC Bank is great for those who are interested in jumbo loan borrowers. It has a high application and website score showing how efficient it is. It offers loans up to $5 million, services most of its loans, and allows application from anywhere – by phone or in-person. Customers can also find informative and educational resources on borrowing for a home purchase from the website.
4. AimLoan.com
AimLoan.com offers loans like conforming fixed 30/25/20/15/10-year, conforming ARM 7/1, or jumbo ARM 10/1. It’s best for transparency, especially when you want to know the truth about rates and fees. It also offers a detailed loan estimate, online rate lock, and you can quickly close via mobile notary. It is an up-front lender, and it uses your borrower characteristics (credit score & property location) and the choices you make about the loan (loan type, down payment, etc.) to determine your interest rate and closing costs.
It falls under best mortgage lenders by giving a detailed estimate based on the borrower’s location, loan type, purchase price, down payment, and credit score. The lender requires a higher minimum down payment of 5% than the 3% of other loaners. Also, some drawbacks of the lender are that it doesn’t allow for preapproval, application without a purchase contract, and government-guaranteed loans.
5. SoFi (Social Finance)
This company is one of the best mortgage lenders, which has grown from being a student refinancing lender to becoming a personal finance lender. It looks into factors like earning potential and credit score when lending to its customers. You start with a pre-qualification which takes about three minutes to complete, followed by picking the loan and completing all the necessary paperwork.
The lender provides 10/15/20/30- year fixed-rate mortgage and does not lend for most investment properties. Its focus is on personal owner-based primary and second homes. Non-members pay an origination fee higher than members. The application process for the lender occurs online; if you prefer dealing with the process online, then SoFi can be a great choice.
6. Reali
Reali provides buying, selling, and lending services which is different from other lenders. You can use their app to look for a home, and once you find it, the company links you with local real estate agents around the area you want to purchase the home. You can do a virtual tour of the house and buy it even without getting to meet your agent or seeing the property.
Working with the lender is very convenient. It offers mortgages plus home listings, so you get the mortgage and buy the home all with one company. The company’s agents also don’t take a commission for assisting in the purchase process, but the seller may charge a commission for the buying agent. And that commission is sent to your bank account as a non-taxable rebate.
7. Guaranteed Rate
If you want an interest-only loan, then the Guaranteed Rate will be most suitable for you. With such an alternative, you can make lower payments each month than with other conventional loans. However, it might not give you a chance to progress on paying off the principle and develop equity in your property. Also, when the interest-only duration ends, your loan payment rises to a much higher amount.
Guaranteed Rate also has another option for those who don’t want to go down the interest-only mortgage path. It offers loans with five to ten years of interest-only payments. It’s among the top 20 lenders in the mortgage industry. There are certain circumstances in which interest-only mortgages can be best. They include; – when you plan to resell the home before that period (interest-only period) ends, you expect a high pay increase before the loan repayment increases, and if you’re a real estate investor.
8. PennyMac
The direct lender offers mortgages with low down payments and has a primarily online-focused operation. It provides a full range of mortgages, including jumbo, FHA, conventional, and VA loans. With over two million+ happy homeowners and more than $473 billion worth of loan amounts serviced, you can trust this company with your mortgage needs. Since they operate online, it’s fast and easy to apply for a mortgage and access the application anywhere, anytime. With its MAC (mortgage access center), you can get the loan pre-approved, complete the application, confirm the loan status, and upload docs all from one place.
9. Citi Mortgage
Are you a low-income earner? Citi Mortgage company has your best interests at heart. Its focus is on people who may not have the traditional 20% required for a down payment, hence are looking for an appropriate mortgage payment that fits into a limited income. Citi requires no mortgage insurance, down payments can be as low as 3%, and you can add money and gifts from outside in the down payment.
10. Better
Better have the ideal combination of features and perks, including low mortgage rates, low down payment (3%), and no origination fees. It also offers an online experience that helps customers to cut their costs while saving time. You can secure a preapproval in minutes, and the company offers $150 off closing costs for those who apply through its Ascent site. The loan types include conventional, FHA, and jumbo loans.
11. Axos Bank
This is a digital financial services company that is best for online mortgages with cashback rewards. It offers all forms of loans, from personal, auto, to home loans. The minimum down payment is 5%, and you require a FICO credit score of 620+. You can earn 3% annualized cashback if you use the checking account to pay your mortgage. The account also helps you to eliminate or lower the $995 lender fee. The lender also offers mortgage loan consultants to discuss your home financing needs.
What Mortgage Lenders Consider When Reviewing Applications
Lenders look into various factors when reviewing your loan application to assess the risk of lending you money. The everyday things they consider include:
- Your FICO credit score. This is a vital thing to consider, and all lenders have to look into it with variations in terms of the lowest credit score required from one lender to another. Most conventional loans require a minimum FICO score of 620, but you can qualify for a loan with a lower score depending on the lender.
- Home price and loan amount. Lenders also have to know the price of the home a borrower would want to purchase. The higher the price, the larger the mortgage, and the greater the risk for the lender. Hence, to limit such a risk, they usually follow government-set limits for loans.
- The down payment. How much do you have to pay upfront for the property? It’s what is called a down payment. The mortgage will cover the rest; the larger the down payment, the lower the interest rate you’ll be charged on the mortgage. The amount borrowed will be less, meaning lenders will be risking less.
- The loan type you want. Several mortgage types are available, including conforming loans, non-conforming loans, conventional mortgages, fixed-rate mortgages, adjustable-rate mortgages, government-backed loans, and balloon mortgages. Thus, lenders will have to consider which type you’re applying for. For instance, government-backed loans typically charge lower interest than conventional loans.
- Loan term. The longer the loan term, the higher the interest you’ll pay.
So, how do you choose the right mortgage lender for you? You can assess most mortgage companies based on four essential factors: – 1) interest rates (look for a better deal), 2) closing costs (compare costs between various lenders and see who has the best overall mortgage costs), 3) product offerings and 4) customer service reviews (look at what other people say about the lender performance).
Final thoughts
Acquiring a mortgage has never been easy, especially without a crystal-clear guidelines on proceeding with the process. Unlike when few companies were available to offer loans, several lenders can assist with mortgages today. The list provided above is only for the few best lenders in 2023. You do well to find out more about others with the same offering. It’s also crucial to understand how the process works and factors to consider before applying for a mortgage through any lender!
