As a first-time homebuyer, it can feel overwhelming to find a mortgage lender with the right combination of convenience and low rates and fees. Confidently select the best lender for you with these tips.

Where to get a mortgage as a first-time homebuyer

It might be tempting to simply go to the bank you keep your accounts with, but you’ll want to compare other options as well so you’ll know you’re getting the lowest possible rate and best terms for your situation. Here’s an overview of the types of mortgage lenders:

Type of lender About
Bank Banks offer banking, investing and loan products, including mortgages. You might opt to work with one of the big banks, such as Bank of America or Chase, or a community or regional bank in your area. With most banks, you can start the mortgage application process at a branch location or online. If you’re already a customer, you might be eligible for a discounted rate or reduced fees on your loan.
Credit union Similar to banks, credit unions are financial institutions, but you often need to meet membership requirements to join. For example, you might need to live in a specific area or work in a specific industry. Credit unions typically offer lower mortgage rates and more personalized service, but you might have limited loan options compared to a bank or non-bank lender.
Non-bank lender Sometimes referred to as independent or non-depository institutions, non-bank lenders offer mortgages either exclusively or with other types of loans. Many non-bank lenders operate online and tend to have quick turnaround times for preapprovals and closings. Some don’t charge fees, either.
Broker A mortgage broker isn’t a lender, but rather an individual or company that connects borrowers to lenders. The broker compares multiple lenders and loan options on your behalf and counsels you on the best option — a valuable service for first-time buyers, especially. Usually, the lender pays the broker’s fee and then passes that cost onto you.
Marketplace If you don’t know where to start when comparing lenders, an online tool like Bankrate can help you identify lenders and rate trends without needing to hop between websites. If you see a lender you like, many marketplaces also directly connect you to the lender for next steps.

How to compare lenders as a first-time homebuyer

When comparing mortgage lenders as a first-time buyer, first consider the costs:

Interest rate and APR

The interest rate is the rate at which your lender will charge you interest on your mortgage. The APR, which stands for annual percentage rate, includes the interest rate and other costs associated with the loan. The APR is always higher than the interest rate. Both percentages are listed on your loan estimate so you can easily compare costs between lenders.

Closing costs

Your closing costs tab can vary based on lender. Some lenders don’t charge an origination fee, for example, or might waive or reduce costs. Here’s a list of common closing costs:

  • Mortgage origination fee
  • Points
  • Application fee
  • Appraisal fee
  • Credit check fee
  • Title search fee
  • Processing fee

Be on the lookout for extra or inflated fees. That’s why it’s important to compare at least two, and ideally three, lenders, so you’ll have a sense of what’s considered standard versus excessive.

Like the interest rate and APR, closings costs are itemized on your loan estimate — but on this document, they’re only estimates, not final numbers.

Once you know exact costs for your situation, you can start comparing other factors like:

  • Does the lender participate in any first-time homebuyer programs?
  • Will the lender work with you if your credit isn’t up to par?
  • Does the lender allow you to lock your rate? If so, for how long and how much does it cost?
  • Can the lender meet your closing timeline?
  • Is the lender easy to get in touch with?
  • Does the lender answer all of your questions satisfactorily?
  • What have past customers had to say about their experience? (Check out lender reviews.)
  • Are there any special perks to working with the lender (for example, a free credit repair service or down payment savings match)?
  • Does the lender offer refinancing or home equity products?

Bottom line

With so many mortgage lending options out there, diligence is key. Take your time comparing at least three lenders — and different types — to learn their individual loan offerings and rates. Once you’ve narrowed down your list, don’t feel pressured by the loan officer to get preapproved. Ask questions about what you can expect from the experience. Ultimately, it’s best to go with what the lender that gives you what you need at the lowest possible rate.