The best mortgage lenders don’t just cater to one type of homeowner. So if you struggle to qualify for a traditional mortgage, you still have plenty of options. Maybe you don’t have the best credit or much of a down payment saved — either way, there’s a mortgage for almost every situation.
We did the work to help you narrow down your choices.
Mortgage rates forecast for 2024
As a result of the Federal Reserve hiking the federal funds rate — which has been between 5.25% and 5.50% since July 2023 — mortgage lenders have increased their rates to generational highs. With current 30-year mortgage rates closing in on 8%, the purchasing power of both first-time and repeat homebuyers has been impacted.
Experts expect mortgage interest rates to peak near 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.
Different types of mortgages
While some lenders specialize in certain kinds of loans, many of the best home loan lenders provide several types of mortgages that you can apply for. In many cases, you can also choose between a fixed- or adjustable-rate mortgage (ARM).
Any of these loans can help you buy a home, but there are different borrower requirements and fees. Here are the different types of mortgages:
- Conventional mortgage: A conventional mortgage is 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.
- 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 for jumbo loans is usually higher than conforming loans.
- FHA loan: Backed by the Federal Housing Administration (FHA), these loans have 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 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.
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.
Other types of mortgages
- 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.
- HELOC: With a 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.
- Construction loans: Finance building a new home from the ground up with multiple draws to minimize borrowing costs. You may be able to convert a construction 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.
Our top picks for mortgage lenders in 2024
BEST ON A BUDGET
Ally
Interest rates
Below national average
DTI ratio
Up to 50%
What you should know
Ally doesn’t charge lender fees — such as application, origination, processing, and underwriting fees — that big banks are more likely to collect. Traditional fixed- and adjustable-rate mortgages as well as jumbo loans are available through Ally.
First-time homebuyers can apply for the Fannie Mae HomeReady Mortgage program, which may only require a 3% down payment. Additionally, an Ally jumbo loan may only require a 10% down payment.
Pros and cons
Pros
- No lender fees.
- HomeReady loan only requires a 3% down payment.
- Can get preapproved within a few minutes.
Cons
- Doesn’t offer FHA, VA or USDA loans.
- Online only.
- Doesn’t offers home equity loan products.
More details
- Interest rates: Below national average.
- DTI ratio: 50%.
- Perks: No lender fees, down payments as low as 3%.
- Preapproval time: Initial preapproval within a few minutes.
- Time to close: A few weeks to a few months, depending on the situation.
BEST FOR FHA LOANS – Better
Interest rates
Below national average
DTI ratio
Up to 50%
What you should know
Buying a home or refinancing through Better.com can minimize your home loan APR as you won’t pay an origination fee, which usually ranges from 0.5% to 1% of the loan value. The platform also offers a real estate agent service that could save you as much as $2,000 on closing costs.
Since you’ll pay fewer fees, Better can be one of the best FHA lenders—requiring only 3.5% down and a minimum credit score of 580.
In addition to FHA loans, Better offers conventional, jumbo and VA home purchase loans. Home improvement loans and cash-out refinancing are available as well. First-time homebuyers may also be able to take advantage of flexible terms and minimal fees.
Pros and cons
Pros
- No origination fees.
- Many different loan options (including FHA and VA).
- Live chat and phone support.
Cons
- Online only.
- Doesn’t offer USDA loans.
- Better Real Estate discount not available in all states.
More details
- Interest rates: Below national average.
- DTI ratio: 50%.
- Perks: No origination fees, up to $2,000 in closing cost savings with real estate agent service.
- Preapproval time: As little as 3 minutes.
- Time to close: Typically 30 to 45 days.
BEST FOR CLOSING COST ASSISTANCE – Bank of America
Interest rates
Below national average
DTI ratio
No maximum
What you should know
Bank of America is the best overall option for many existing homeowners and first-time homebuyers since they offer many fixed-rate, low-down-payment, and government-backed home loans. Doctor loans are also available for medical professionals with a high student loan balance.
This lender doesn’t publicize traditional credit score and DTI ratio requirements as they analyze several borrower factors. Some include your ability to pay, banking relationships, and current home equity (if applicable).
In addition to loan programs that may accept a down payment as low as 3% of the home purchase price, the lender also offers grants to reduce a borrower’s down payment and closing costs.
Pros and cons
Pros
- Many different loan options.
- Down payment and closing cost assistance.
- Flexible borrower requirements.
Cons
- Doesn’t offer USDA loans.
- FHA and VA refinance loans only available to existing customers.
- Preapproval can take up to 10 days.
More details
- Interest rates: Below national average.
- DTI ratio: No maximum.
- Perks: Income-based grants and Bank of America Preferred Rewards discounts.
- Preapproval time: Up to 10 days.
- Time to close: Typically 4 to 6 weeks.
BEST FOR LOW ORIGINATION FEES – USAA
Interest rates
Below national average
DTI ratio
Up to 50%
What you should know
USAA currently doesn’t charge origination fees for VA-backed purchase or refinance loans. The fee is low for conventional loans at 1% of the loan amount ($1,295 maximum fee).
Most loan options are for VA home loans although the lender offers conventional loans that require as little as 3% down. Applicants can apply online or by phone.
A potential roadblock is the institution’s strict membership eligibility standards. Membership is only available to U.S. military members, veterans, precommissioned officers, spouses and children.
Pros and cons
Pros
- No origination fee on VA-backed loans.
- Provides first-time homebuyer loans.
- Specializes in VA home loans.
Cons
- Does not offer home equity loans or HELOCs.
- Can only apply online or by phone.
- Strict membership requirements.
More details
- Interest rates: Below national average.
- DTI ratio: 50%.
- Perks: Low down payment options for military and first-time homebuyers.
- Preapproval time: Get online preapproval in a few minutes.
- Time to close: 30 to 45 days.
BEST FOR DISCOUNTS – Chase
Interest rates
Below national average
DTI ratio
Up to 43%
What you should know
Chase is one of the better big banks to get a home loan from as you can qualify for a relationship discount up to 0.50%. Your total interest rate discount depends on your Chase banking and J.P. Morgan investment balances.
Additionally, borrowers in select areas can qualify for a Chase Homebuyer Grant worth up to $5,000. This assistance can be helpful to first-time homebuyers.
You may also prefer Chase as you can apply online or through a local branch.
Pros and cons
Pros
- Can apply online or in person.
- Offers relationship rate discounts.
- Homebuyer grants worth up to $5,000.
Cons
- Best relationship discount requires a high deposit balance.
- Doesn’t offer USDA loans.
- Certain loans have strict requirements.
More details
- Interest rates: Below national average.
- DTI ratio: 43%.
- Perks: Homebuyer grants, relationship discounts, closing guarantee.
- Preapproval time: Not disclosed.
- Time to close: Within 3 weeks (or you’ll get $5,000 through Chase’s closing guarantee).
Final Thoughts:
Choosing the right mortgage lender involves considering not just the interest rates but also the terms, customer service, and overall suitability to your financial goals. Conducting thorough research and comparing offers from multiple lenders can help you secure the most competitive rate tailored to your needs in 2024.