Best mortgage lenders of April 2024 (2024)

Best mortgage lenders

• Ally: Best on a budget.
• Better: Best for FHA loans.
• Bank of America: Best for closing cost assistance.
• USAA: Best for low origination fees.
• Veterans United: Best for VA loans.
• New American Funding: Best for custom mortgages.
• Chase: Best for discounts.
• SoFi: Best for quick closings.
• Navy Federal Credit Union: Best for military.
• Wells Fargo: Best for thin credit.

Compare the best mortgage lenders

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Current mortgage rates

Mortgage rates are constantly fluctuating, so it’s a good idea to check them regularly when you’re preparing to take out a mortgage. Here are the current mortgage rates to give you an idea of what to expect as you compare your options.

Mortgage rates forecast for 2024

The Federal Reserve has hiked the federal funds rate 11 times since March 2022 in an effort to combat inflation. As a result, mortgage lenders have increased their rates to generational highs, which has impacted the purchasing power of both first-time and repeat homebuyers.

Experts expect mortgage interest rates to peak near 7% or even 8% in 2024 before gradually trending lower — possibly landing between 5% to 6% before the end of the year. However, what will happen will ultimately depend on the future actions of the Fed and how fast rates might drop if the Fed’s current trend of higher-for-longer rates reverses.

What is a mortgage and how does it work?

A mortgage finances a home purchase and is repaid over a specified number of years through monthly payments. Most home loans have a repayment period from 10 to 30 years and a fixed interest rate.

Your interest rate depends on several factors including your loan term, mortgage type and credit history. You will keep the same rate, term and monthly payment unless you decide to apply for a mortgage refinance and replace your existing loan.

Borrowers with a fixed-rate mortgage enjoy the same monthly payment amount for the life of the loan. As the remaining loan balance decreases, more of the payment reduces the principal as less interest accrues.

Longer-term mortgages, such as a 30-year term, have the lowest monthly payments but your total interest costs are higher than shorter terms as it takes longer to pay off the loan.

In contrast, shorter terms, like a 15-year mortgage, usually have less total interest and better interest rates although your monthly payment is higher due to the more aggressive payoff date.

Different types of mortgages

There are several different types of mortgages you can apply. Any of these loans can help you buy a home, but there are different borrower requirements, interest rate types and fees.

Here are the different types of mortgages:

• Conventional mortgage: A non-government loan issued by a private lender. This loan can have lower fees than federally-backed loans. Additionally, most are conforming loans with county-specific loan limits set by the Federal Housing Finance Agency (FHFA) and have lower interest rates than non-conforming loans.
• Fixed-rate mortgage: A home loan with the same interest rate and monthly payment for the life of the loan. Borrowers follow an amortization schedule with a repayment period from 10 to 30 years.
• Adjustable-rate mortgage (ARM): Also known as a variable-rate mortgage, this product typically has a fixed interest rate for an introductory period of several years. Next, it switches to a variable rate that can adjust up or down at defined increments. Your monthly payment fluctuates as rates change but it can be a more affordable loan type for homeowners planning to sell in a few years.
• Jumbo loan: A non-conforming loan to buy properties exceeding the conforming loan limit. This option is more common in high-cost housing markets. The interest rate is usually higher than conforming loans.
• FHA loan: Backed by the Federal Housing Administration (FHA), this loan has more lenient credit and down payment requirements than conventional mortgages. Lenders may only require a minimum 580 credit score and a 3.5% down payment. However, mortgage insurance premiums can apply for the entire repayment period.
• VA loan: The U.S. Department of Veterans Affairs (VA) insures home loans to eligible service members, veterans and spouses. A VA-backed purchase loan doesn’t require a down payment or mortgage insurance, although a one-time funding fee applies.
• USDA loan: Available to borrowers in qualifying rural areas, the U.S. Department of Agriculture (USDA) may not require a down payment. However, income requirements apply along with annual mortgage insurance fees.
• Construction loans: Finance building a new home from the ground up with multiple draws to minimize borrowing costs. You may be able to convert this loan into a permanent mortgage once your house is move-in ready.
• Interest-only mortgage: Only pay interest during the initial portion of the repayment period. Principal and interest payments are due after the introductory period ends.
• Balloon mortgage: A loan with low ongoing monthly payments yet requires a significant final lump-sum payment. The Consumer Financial Protection Bureau rarely considers this loan type a qualified mortgage due to its high level of risk.
• Piggyback loan: A second mortgage that helps cover the down payment so the loan-to-value ratio is 80% or lower for the first mortgage. As a result, the buyer doesn’t need to make private mortgage insurance premiums.
• Home equity loan: This is a second mortgage for existing homeowners to receive a lump-sum distribution of their available equity. It’s an alternative to a cash-out refinance as it leaves the original mortgage intact and has a fixed interest rate.
• Home equity line of credit (HELOC): Current homeowners can tap their available equity with multiple draws as cash is needed. Interest-only payments are required during the draw period and principal payments start when the draw period closes and the repayment period begins. HELOC rates are almost always variable.

First-time homebuyer tip: You might be eligible for reduced down payment requirements of 3% or less on conventional loans. These specialized programs may not require private mortgage insurance (PMI) although your interest rate can be higher than putting at least 20% down.Lenders and government agencies might also offer down payment or closing cost grants and assistance to first-time homeowners.

How to apply for a mortgage

Following these steps can help you qualify for a home loan:

1. Review your credit history. Check your credit score to determine which mortgage programs you can be eligible for initially. Conventional home loans usually require a minimum 620 credit score while government-backed mortgages can be as low as 580 or even 500.
2. Collect supporting documentation. Gathering your recent pay stubs, two years of income tax returns, two months of bank statements and government-issued ID cards can help you save time when it’s time to apply.
3. Compare lenders. Applying for mortgage preapproval requires a hard credit check but you can receive a personalized rate and loan limit for conventional and government-backed programs. Get rate quotes from several lenders to find the best offer.
4. Apply for a loan. After a seller accepts your offer, it’s time to apply for a mortgage through your desired lender. A loan officer can help compare your loan and down payment options to get the best rate and monthly payment.
5. Complete the underwriting process. The application-to-close process usually takes from 30 to 45 days. During this time, the lender will review your credit and income history and request supporting documentation as needed. Your new home will also be appraised to calculate your loan-to-value ratio and minimum down payment.
6. Sign closing documents. At the loan closing, you will sign the final documents to confirm the repayment agreement. Any upfront fees are due at this time. You can move into your home and will start making monthly payments.

Tips for choosing the best mortgage

These practices can help you find the best mortgage lender and loan type:

1. Know how much house you can afford. A home affordability calculator estimates the monthly payment you can comfortably afford. Having a maximum purchase price in mind can also make it easier to get preapproval if you can find a house for less than your maximum borrowing power.
2. Compare home loan options. Your credit score, annual income and geographic area may help you qualify for government-backed FHA, VA or USDA loans. These loans can have more lenient borrower requirements than conventional loans.
3. Consider down payment requirements. First-time homebuyers may only have to put 5% down or less. These loans can be easier to qualify for than a traditional conventional loan, but you may consider a 20% down payment to avoid private mortgage insurance.
4. Choose a mortgage term. Opting for a 15-year or a 20-year fixed-rate mortgage instead of a 30-year term lets you qualify for a lower interest rate if you can afford a higher loan payment and pay less interest overall. Be sure to estimate your monthly mortgage escrow payments to calculate your housing costs accurately.
5. Compare several lenders. Prequalify with multiple lenders to compare mortgage rates and fees which can vary widely for a similar loan amount and repayment period. In addition to your upfront closing costs and monthly payment, see if the lender offers other perks such as waived lender fees if you refinance later.

Frequently asked questions (FAQs)

Editor’s Note:This article contains updated information from previously published stories:

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• Government shutdown 2019: Homebuyers with USDA mortgages can’t close on house sales
• Low down on new low down conventional loans
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• Mortgage delinquencies surge by 1.6M in April, the biggest monthly jump ever
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• Mortgage interest rates 2018: Rates hit 7-year high, slow home sales
• Mortgage rates on 30-year home loan hit 5 percent, a nearly 8-year high
• Average 30-year mortgage rate tops 4%
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• Mortgage rates dip as taper fears subside
• Mortgage applications surge on refinances as rates hit 21-month low
• Will mortgage rates keep dropping? Homeowners and buyers benefit from lower interest rates
• Average 30-year mortgage rate drops to 4.22%
• Mortgage closing costs are on the way up
• Amid surging COVID-19, Fed could take steps to lower mortgage rates, boost economy