As a first-time homebuyer, it can feel overwhelming to find a mortgage lender with the right blend of convenient service and low rates and fees. But there are key elements to compare when searching for the best mortgage offer as a first-time buyer that can help you pick a lender.

Key takeaways

  • Finding the best mortgage lenders for first-time buyers means looking not just at their interest rates but also their service, fees and more.
  • Most mortgage lenders offer home loans for first-time homeowners.
  • When comparing mortgage options, consider programs made for first-time homebuyers.
  • Mortgage rates for first-time homebuyers depend on the lending institution and the individual's financial profile.

Types of mortgage lenders for first-time homebuyers

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. That way, you’ll know you’re getting the lowest possible rate and best terms for your situation.

To help you pinpoint the best mortgage lenders for first-time buyers, here’s an overview of the types of mortgage lenders you can compare:

  • Banks: 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 unions: 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 for first-time homebuyers and more personalized service, but you might have limited loan options compared to a bank or non-bank lender.
  • Non-bank lenders: 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.
  • Brokers: 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 when you want to compare mortgages as a first-time buyer. Usually, the lender pays the broker’s fee and then passes that cost onto you.
  • Marketplaces: If you don’t know where to start when comparing mortgage rates and 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, start off by considering 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 almost 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 the 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
  • Mortgage 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, closing costs are itemized on your loan estimate — but on this document, they’re only estimates, not final numbers.

Down payment

The best mortgage lenders for first-time buyers generally offer specific programs that allow you to put less money down. For first-time homeowners, lenders can often approve a loan with as little as 3 percent down. If you’re looking to buy without depleting your savings, look closely at the down payment requirement as you compare mortgage offers.

Questions to ask mortgage lenders as a first-time homebuyer

Once you know the exact costs for your situation, you can start comparing other important factors. For example, you might ask:

  • What paperwork and documentation do you need to get approved for the loan?
  • Can you go through the mortgage application process online and over the phone, or do you need to visit a location in person?
  • Does the lender offer 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 to your satisfaction?
  • 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?

With so many mortgage lending options out there, diligence is key. Take your time comparing at least three lenders to learn their loan offerings and rates, and ask questions about what you can expect from the experience.

Ultimately, it’s best to go with the lender that gives you what you need at the lowest possible rate.