Choosing a Lender

A lower advertised rate doesn't always mean a lower cost. Some lenders offer a reduced rate by charging discount points upfront — essentially prepaying interest at closing. A rate that's 0.25% lower might cost you $4,000–$6,000 in points, which takes years to recoup. Others advertise low rates as a marketing hook but build the cost into higher origination fees or processing charges.

The only way to compare apples-to-apples is with the Loan Estimate — a standardized document every lender must provide. It shows the rate, points, fees, and total cost side by side. I'd always rather a client choose a lender with a slightly higher rate who communicates well and closes on time over one with a bargain rate who can't execute.

They serve different purposes at different stages. A pre-approval happens before you find a home — the lender reviews your financials and tells you how much you can borrow. It's your green light to start shopping.

A Loan Estimate comes later, after you've applied for a specific loan on a specific property. It's a detailed, three-page document that breaks down your interest rate, monthly payment, closing costs, and total cost of the loan over time. By law, the lender must provide it within three business days of your application. This is the document you use to compare lenders once you're under contract.

Most fees aren't technically hidden — they're just buried in the fine print. Common ones to look for include origination fees (typically 0.5%–1% of the loan amount), discount points used to buy down your rate, processing and underwriting fees, and rate lock extension fees if your closing gets delayed. Some lenders also charge application or credit check fees upfront.

The Loan Estimate is your best defense here. It standardizes how fees are presented, so you can compare two lenders side by side. If a lender's fees seem unusually low, check whether they've offset them with a higher rate — or vice versa.

A mortgage application triggers a hard credit inquiry, which can temporarily lower your score by a few points. But the credit bureaus understand that smart borrowers shop around. If you apply with multiple lenders within a 45-day window, all of those inquiries are treated as a single pull for scoring purposes. So there's no penalty for comparing two or three lenders — just do it within that window.

Your interest rate isn't locked until you have an executed contract on a property — meaning both you and the seller have signed. At that point, you can ask your lender to lock your rate for a set period, typically 30–60 days. Until then, rates fluctuate daily based on market conditions, which is why shopping rates weeks before you make an offer doesn't give you reliable numbers.

Your final monthly payment amount is confirmed on the Closing Disclosure, which you'll receive at least three business days before closing. It includes your principal, interest, property taxes, homeowners insurance, and any mortgage insurance — the full picture.

It depends on the loan type. Conventional loans can go as low as 3% down. FHA loans require 3.5%. VA loans (for eligible veterans and active-duty service members) and USDA loans allow 0% down. A 20% down payment avoids private mortgage insurance (PMI) on a conventional loan, but it's not a requirement — and for many buyers, putting less down and keeping cash reserves makes more strategic sense.

Your lender will help you weigh the tradeoffs between a larger down payment (lower monthly payment, no PMI) and a smaller one (more cash on hand for repairs, furnishing, or an emergency fund).

For most lenders, pre-approval is free. Some may charge a small credit check fee (typically $25–$50), but many waive it entirely. You won't pay meaningful loan fees until you're under contract and formally applying for the mortgage. There's no good reason to delay getting pre-approved because of cost concerns — the bigger risk is finding a home you love and not being ready to make an offer.