For many people, looking into home loans is a key step in the homebuying process. Because a house is likely the biggest purchase of your life, you should consider the best mortgage lenders. Top mortgage lenders not only save you money but also help make homebuying less stressful. This guide can assist you when you are ready to apply for a mortgage.
U.S. News selects the Best Loan Companies by evaluating affordability, borrower eligibility criteria and customer service. Those with the highest overall scores are considered the best lenders.
To calculate each score, we use data about the lender and its loan offerings, giving greater weight to factors that matter most to borrowers. For mortgage lenders, we take into account each company’s customer service ratings, interest rates, loan product availability, minimum down payment, minimum FICO score and online features.
The weight each scoring factor receives is based on a nationwide survey on what borrowers look for in a lender.
To receive a rating, lenders must offer qualifying loans nationwide and have a good reputation within the industry. Read more about our methodology.
Caliber Home Loans of Coppell, Texas, offers mortgage products nationwide. Options include conventional, adjustable-rate, jumbo, refinancing, Federal Housing Administration, U.S. Department of Agriculture and Department of Veterans Affairs loans. Caliber has been in business since 2008, and is solely focused on home lending products.
Carrington Mortgage Services, founded in 2007, offers an array of mortgage and refinancing options to borrowers seeking conventional or government-backed loans. Its California-based parent company, Carrington Holding Co., was established in 2003 and provides a range of real estate services. Carrington Mortgage Services is based in California and also has offices in Arizona, Connecticut, Florida, Indiana and Maryland.
Pentagon Federal Credit Union, widely known as PenFed, offers borrowers access to many types of mortgages: conventional, adjustable rate, jumbo and Department of Veterans Affairs, plus refinancing loans and home equity lines of credit. The financial institution, which serves 2.5 million members, was established in 1935 and is based in McLean, Virginia.
North American Savings Bank, or NASB, is a Missouri-based bank and lender founded in 1927 that offers home mortgages nationally. NASB provides a variety of mortgage options, including conventional, Federal Housing Administration and Department of Veterans Affairs loans, and products for borrowers who might otherwise have trouble getting a mortgage.
AmeriSave Mortgage Corp. is an online lender that has been in business since 2002. It was one of the first to offer an offsite, digital mortgage experience for customers. The company says it has financed more than 664,000 borrowers since it began operating. With headquarters in Atlanta, AmeriSave services loans in 49 states and Washington, D.C.
What Are Current Mortgage Rates?
The average 30-year fixed mortgage rate rose from around 3% in December 2021 to 5.81% in June 2022, according to Freddie Mac. During the first week of August, however, mortgage interest rates fell below 5% for the first time since April. While rates dropped meaningfully, borrowing costs for both fixed-rate and adjustable-rate mortgages remain significantly higher now than they were this time last year. Here are the current mortgage rates, as of August 4:
- 30-year fixed: 4.99% with 0.8 point (down from 5.3% a week ago, up from 2.77% a year ago).
- 15-year fixed: 4.26% with 0.6 point (down from 4.58% a week ago, up from 2.1% a year ago).
- 5/1-year adjustable: 4.25% with 0.3 point (down from 4.29% a week ago, up from 2.4% a year ago).
“The rapid rise in mortgage rates has finally paused, largely due to the countervailing forces of high inflation and the increasing possibility of an economic recession,” says Sam Khater, Freddie Mac’s chief economist, in a press release. “This pause in rate activity should help the housing market rebalance from the breakneck growth of a seller’s market to a more normal pace of home price appreciation.”
Still, buyers shouldn’t expect fixed rates to drop down to sub-3% levels again anytime soon – the Mortgage Bankers Association’s latest Mortgage Finance Forecast shows that rates will likely remain above 5% for most of 2022.
Shopping around for the lowest possible rate with multiple mortgage lenders can save you thousands over the life of your loan. Compare your mortgage rate offers with national average trends.
A mortgage is a loan from a bank or other lender used to buy or refinance a home.
Mortgages are secured loans: The property acts as collateral as you repay the loan in monthly installments, including interest, often over 15 to 30 years. If you fail to pay, the lender can foreclose on your home.
U.S. News Survey
U.S. News Survey: Despite Rising Interest Rates, Low Inventory and High Prices, 70% of Homebuyers Are Optimistic About Their Prospects
A U.S. News survey in March found that people who are planning to buy a home or refinance their mortgage in the next year are feeling good about their chances. While acknowledging that interest rates are already rising from historic lows and housing inventory remains tight, 70.3% of respondents say they feel generally optimistic about their homebuying or refinancing prospects. Though hopeful, nearly as many respondents, 69.9%, say they regret not starting their homebuying or refinancing process earlier.
When respondents evaluate home affordability or availability, 50.3% say affordability is the bigger concern in today’s housing market. About half as many – 26.8% of respondents – say availability is the bigger issue, while another 22.9% of respondents say the problems are completely intertwined.
Additional Survey Insights
Most respondents are first-time homebuyers: 48.3% of people are shopping to buy their first homes, while 18.9% of people are selling their current homes and buying a new one. Another 22.4% of people are refinancing their existing mortgages.
For respondents who are refinancing, 41.6% are doing it to lower their monthly payments.
Two-thirds of respondents (65.9%) are getting a mortgage that’s $400,000 or less.
There isn’t a clear preferred way that respondents are picking their mortgage lender. While 20.8% of respondents are sticking with their current lender or bank, 30.5% are searching online to find a new lender. A full 11.2% of respondents say they don’t know how they are going to pick.
The conventional, 30-year fixed-rate mortgage is the most popular mortgage type, with 33.8% of respondents saying they plan to get it. The conventional, 15-year fixed-rate mortgage has a strong second-place showing with 30.3% of respondents saying they prefer that option.
Respondents say that to improve their local housing situation, the best things the government could do would be to give first-time homebuyers a tax credit (42.3%) and stop investors from buying homes (37.3%). Only 19.3% of respondents say the government shouldn’t be doing anything.
U.S. News Survey Methodology
- U.S. News ran a nationwide survey of 1,200 respondents through PureSpectrum on March 4, 2022. Only people who are planning to buy a home or refinance their mortgage in the next year answered questions.
- The survey sample drew from the general American population, and the survey was configured to be representative of this sample.
- The survey asked nine questions relating to homebuying and home financing.
The right mortgage for you will depend on your finances, plans and preferences. Here are common types of mortgages:
Conventional mortgages. These mortgages are not guaranteed by the federal government and are funded by private lenders. You may need a minimum credit score of 620, a maximum debt-to-income ratio of 43% and a down payment of at least 3% to qualify for a conventional loan. However, you will generally need to buy private mortgage insurance, or PMI, anytime your down payment is less than 20%.
Government-backed mortgages. These include Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture loans, which are less risky for lenders because the government agency insures the loan. You may have more success getting a government-backed loan if you can’t qualify for a conventional loan, but keep in mind that they typically come with more stringent property requirements.
- FHA loans: Most lenders require a minimum credit score of 580 and a 3.5% down payment for an FHA loan, but you could qualify with a credit score between 500 and 579 and a 10% down payment.
- USDA loans: Most lenders require a credit score of 640 with no money down for USDA loans. You will need to meet income requirements and buy a home in eligible rural areas.
- VA loans: The VA allows you to buy a home with no money down. VA loans are the only mortgage option that offers a 0% down payment with no private mortgage insurance. You will need a Certificate of Eligibility, or COE, to show your lender that you qualify for the VA loan based on your service. You’ll typically have to pay a VA funding fee between 1.4% and 3.6% of the total loan amount.
Jumbo mortgages. Jumbo loans exceed conforming loan limits set by the Federal Housing Finance Agency and have stricter qualification standards because of the risk to lenders. For mortgages originated in 2022, the baseline conforming loan limit is $647,200, although this figure may be higher if you live in a high cost-of-living area.
Balloon mortgages. These home loans feature lower monthly payments paired with a larger lump-sum payment during the loan term. The lower monthly payment compared with a traditional mortgage may appeal to a buyer who plans to sell or refinance before the balloon payment is due. But since you’re making smaller payments, you’ll have built less equity when you decide to sell or refinance.
Your mortgage interest rate is the annual cost of your loan amount, expressed as a percentage of the total loan amount. It does not include fees and other costs. A 5% interest rate on a mortgage means you will pay 5% of your loan’s balance in interest each year. Your mortgage also has an annual percentage rate that reflects your interest rate plus other charges, such as most closing costs, discount points and origination fees.
Mortgage interest rates can be fixed or adjustable. Whether a fixed-rate mortgage or an adjustable-rate mortgage is best can depend on market conditions, your finances and how long you plan to keep your mortgage.
A fixed-rate mortgage keeps the same interest rate throughout the entire loan term, and your monthly payment stays the same. You don’t have to worry about costs going up, but you can’t benefit if market rates fall unless you refinance your mortgage.
The monthly payments on a fixed-rate mortgage are typically higher than the initial monthly payments on an adjustable-rate mortgage because the lender can’t increase your interest rate later.
A 30-year fixed-rate mortgage tends to be the most popular choice because monthly payments stay low over the loan’s life span. A 15-year fixed-rate mortgage has a higher monthly payment but greater overall interest savings compared with the 30-year term because you pay it off in half the time.
The interest rate on adjustable-rate mortgages, or ARMs, can change over time. After an initial period during which your rate is set, your monthly payments can rise or fall based on market rates. ARM interest rates depend on an index that tracks a benchmark rate, such as the prime rate.
When benchmark rates go up or down, so does your interest rate – and your mortgage payment. Adjustable-rate mortgages can make sense when you plan to sell or refinance your home before the rate increases, or if you expect market rates to decrease.
With a 10/1 or 5/1 ARM, your interest rate and monthly payment is fixed for the first 10 or five years, respectively, and the rate adjusts every year after that period. And for the 10/6 or 5/6 ARM, your rate will adjust every six months after the fixed period. If you plan to sell or refinance before the adjustment period, this mortgage might work for you.
- The ability to purchase a home you couldn’t otherwise buy in cash.
- Building equity as your home typically appreciates.
- Improving your credit score with consistent, on-time mortgage payments.
- Claiming money-saving tax breaks.
- Allowing you control over home improvements and upgrades.
- Having to pay a down payment, closing costs and other upfront expenses.
- Budgeting for property taxes, homeowners association fees and repairs.
- Needing to meet certain credit score and debt-to-income requirements.
- Putting in time and effort for upkeep.
- Having less flexibility if you want to move for a job or to care for a loved one.
Mortgage lenders want to know the risk of lending you money. A lender will look at not only your credit history but also your income, down payment and other key factors when reviewing your application. Here’s what lenders will consider when determining your eligibility for a mortgage and, ultimately, the interest rate you receive:
Credit score. Your credit score is a major factor, but the minimum credit score can vary by lender and loan program. A conventional loan typically requires a minimum FICO score of 620, but some programs allow you to qualify with a lower credit score. Borrowers with bad credit may receive offers with larger down payment requirements and higher mortgage rates, although rates are more heavily influenced by market conditions.
Debt-to-income ratio. Your DTI is the percentage of your monthly income that’s spent on repaying debt. To calculate your DTI, divide your monthly bills by your gross monthly income. Mortgage lenders will look closely at your front-end DTI ratio, which is the amount of your income spent on housing costs. You should aim to keep your DTI at 43% or lower to qualify for a mortgage.
Down payment. Your down payment is the amount you pay upfront for the property, while the mortgage covers the rest. A larger down payment can lead to a lower interest rate on your mortgage. You’ll be borrowing less money, and your lender is taking on less risk. If your down payment is below 20%, you’ll be required to carry private mortgage insurance in most cases.
Loan amount. The larger your mortgage, the greater the risk for the lender. Lenders limit risk by following government loan limits. If you want to buy a property that costs more than these limits, you can apply for a jumbo loan. Higher loan amounts typically come with higher interest rates and stricter income and credit score requirements.
Loan term. The term is how long you have to repay the loan. The longer the term, the lower your monthly payments. A longer term typically has a higher interest rate and higher total costs compared with a shorter loan term. Shorter-term loans, like a 15-year mortgage, come with lower interest rates and overall costs but higher monthly payments.
Loan type. Government-backed loans may charge lower rates than conventional loans, especially for buyers who have fair credit. Conventional mortgages may offer more competitive rates if you have very good or excellent credit, but they may be difficult to qualify for if you’re a subprime borrower.
A mortgage down payment can be financial roadblock for prospective homebuyers, but there’s some good news: Plenty of mortgage options require little to no down payment, although you’ll usually be required to carry private mortgage insurance for down payments less than 20%. PMI costs between 0.5% to 2% of the total loan amount per year, and it’s added to your monthly mortgage payment.
No-down-payment mortgages: Select government-backed mortgage programs don’t require a down payment from borrowers. Active-duty military and veterans who meet the eligibility requirements for VA loans can get a mortgage with 0% down and no private mortgage insurance. Buyers in qualified rural areas may qualify for a USDA mortgage with no down payment, but PMI is typically required.
Low down-payment mortgages: FHA loans require as little as 3.5% down for borrowers who meet certain credit score thresholds, although the down payment requirement may be higher if you have poor credit. And some conventional mortgages through private lenders require a 3% down payment. Both FHA loans and conventional loans will require you to carry mortgage insurance if your down payment is low.
How Do You Get Preapproved for a Mortgage?
Before you begin to browse homes, you should start the mortgage preapproval process. Getting preapproved for a mortgage allows you to compare your estimated mortgage rate across multiple lenders before you formally apply. Some sellers only work with preapproved buyers, plus preapproval allows you to make an offer as soon as you find a place you love. Here’s how the mortgage preapproval process works:
Check and improve your credit. Review your credit history by requesting a free copy of your credit report from all three credit bureaus on AnnualCreditReport.com. Be sure to dispute any errors on your credit report before you apply for a mortgage by contacting the credit bureaus directly. You can boost your credit score by consistently making on-time debt payments and reducing your credit card balances.
Apply with a few lenders to allow for comparison shopping. Comparing rate quotes from at least four lenders may save you $3,000 over the life of your home loan, according to research from Freddie Mac. Your credit score will not suffer significantly as long as you contain this process to 45 days, according to FICO’s newest scoring model. Multiple inquiries made in this period count as a single inquiry.
Compare offers and choose a mortgage lender. Each lender will provide you with a loan estimate showing your interest rate, monthly payment and other key details, such as closing costs. Select the best option after you have evaluated the features of each home loan lender.
You can evaluate mortgage companies based on four key factors:
- Interest rates. Interest can vary by lender and by product, so when you shop around and compare mortgage rates, you could find a better deal.
- Closing costs. When you factor in closing costs, which can include application, appraisal and loan origination fees, the lender with the lowest rate may not offer the best overall mortgage costs. Compare costs between lenders using the APRs.
- Product offerings. Look for a mortgage lender in your state with options that work for you, whether that’s a 30-year fixed-rate loan, a VA loan or something else.
- Customer service reviews. Use customer service feedback to research lender performance. Lenders should not only offer great loan rates but also treat customers well.
The mortgage process looks different depending on whether you are purchasing or refinancing a home. Here are some of the basic steps involved in getting a mortgage to buy a house:
- Submit your mortgage application. Most lenders offer an online mortgage application process for home loans. You will complete a full application and provide documentation to the lender. At this point, the lender will closely review your financial history, income and existing debts.
- Review your loan estimate. You will get a loan estimate within three business days of the lender receiving your application. This document will include your estimated interest rate, monthly payment and closing costs.
- Lock in your mortgage rate. Your mortgage lender will give you the opportunity to lock in your interest rate through the closing date. Rate locks typically last between 15 to 60 days, with longer rate locks being more expensive. Alternatively, you may be given the option to bypass the rate lock, or “float” your rate.
- Purchase discount points. You may be able to secure a lower mortgage rates by purchasing discount points, which are expressed as a percentage of the total loan amount. You may want to skip buying mortgage points if you plan to sell or refinance the home within a few years.
- Schedule a home inspection. You’ll want the inspection done as soon as possible to leave enough time to negotiate with the seller if the inspection reveals any problems. Although more buyers have been waiving inspection contingencies in recent years, according to the real estate website Redfin, you may still want to get an inspection before closing for peace of mind.
- Pay for a home appraisal. Your lender orders the home appraisal, but you’ll typically have to pay for it. This is usually included in your closing costs. A home appraiser will visit the property to ensure the value is consistent with your mortgage loan amount.
- Purchase homeowners insurance. This insurance is required before your loan can be approved. Your lender may require you to keep homeowners insurance premiums and property taxes in an escrow account, which allows you to include these costs in your mortgage payment.
- Budget time for mortgage processing. Mortgage processing prepares your loan for underwriting. Then an automated underwriting system typically reviews mortgage applications, with manual underwriters intervening if the system finds a red flag. Underwriting can take anywhere from a couple of days to more than a week.
- Review the closing disclosure. By law, you must receive a closing disclosure at least three business days before you sign the mortgage documents. Be sure to compare the disclosure with the most recent home loan estimate from your lender so you don’t miss any big changes.
- Close on the loan. This is when you and all the parties in the mortgage transaction sign the necessary documents. Plan to pay your down payment and closing costs, which range from 2% to 5% of the purchase price. You will sign a heap of documents to complete your purchase. Congratulations!
Buy a house in cash. Though, the vast majority of buyers need to finance their home purchase, according to the National Association of Realtors. Buying a home in cash may help set your offer apart from the rest, if you can come to the table with that much funding.
Ask for a loan from a family member. Make sure the terms of the loan are clear and in writing. Keep in mind that borrowing money from a loved one can strain your relationship.
Look into seller financing. The seller acts as the lender in this type of real estate agreement. Seller financing could mean lower closing costs and flexible terms. On the other hand, it offers fewer buyer protections and potentially charges higher interest rates compared with traditional methods.
Rent to own. You will be able to buy the home after a few years of renting it. This can work in a couple of ways. A portion of the monthly rent would go toward credit for buying the home at the end of the lease, or it may go toward the down payment. The risks are that you will lose your money if you decide not to buy the home and you must be ready to qualify for a loan to purchase the home at the end of the lease.
Hold off on buying a home. Wait a few years until you have more in your savings account. Although a 20% down payment is the rule of thumb, you can still qualify with smaller amounts. If you’re young, you will also have a chance to build more credit history and figure out where you want to live.
Veterans United Home Loans offers mortgages in all 50 states and Washington, D.C., and specializes in Department of Veterans Affairs loans. Since 2016, Veterans United Home Loans has generated the largest number of VA purchase loans per year in the nation. The lender was founded in 2002 and is based in Columbia, Missouri.
Founded in 1990, Freedom Mortgage is one of the country’s largest loan originators and services, operating in all but two states plus the District of Columbia, the U.S. Virgin Islands and Puerto Rico. Based in Mount Laurel, New Jersey, Freedom Mortgage was named No. 1 Veterans Affairs lender and No. 1 Federal Housing Administration lender by the industry publication Inside Mortgage Finance. Freedom Mortgage offers a range of mortgage loans, including conventional, adjustable-rate, refinance, FHA, VA and U.S. Department of Agriculture. But what Freedom Mortgage is known for is its mission to help American military personnel purchase a home.
LoanDepot is a mortgage lender that operates nationally with more than 200 branches and delivers both a digital experience and face-to-face service. The lender offers fixed- and adjustable-rate conventional mortgages, Federal Housing Administration and Department of Veterans Affairs loans, as well as refinance and renovation loans. The company was founded in 2010 and is based in Foothill Ranch, California.
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