For most of us, buying a home is the largest purchase we’ll ever make. There can be a lot of pressure to get things just right; you don’t want to pay more than you have to. A good broker or lender can help — but how do you find a good broker or lender? That’s what Erin wants to know:

My husband and I are in the market for a house as first-time homebuyers. We’ve done our research about the process of obtaining financing, and all the advice says to shop around for a mortgage. But how do you go about finding lenders or brokers to compare?

Web searches turn up hundreds of lenders and brokers in our major metro area, but I haven’t found a good consumer resource for evaluating them on things like customer service and borrower experience. Our realtor has a list of brokers that his clients have recommended, but it’s not a long enough list to really shop around with. We would generally prefer to have a mortgage through a local institution if possible and if it makes sense compared to other options.

What’s the best way to do this?

One way to research mortgage rates is through sites like Shoprate and Money Rates. These resources can help you locate great mortgage rates from around the country, including most major metropolitan areas.

But perhaps the best way to find a good broker is to seek recommendations from family and friends. Obtaining a mortgage isn’t just about finding the best interest rate (thought that’s probably the most important factor). You also want to find somebody you can work with and trust. Personal recommendations can offer color and nuance that you just can’t find from a website.

When I shop for mortgages, these three factors are most important to me:

  • Good rates. Many first-time homebuyers don’t realize that even a small change in interest rates can make an enormous difference in the monthly mortgage payment — and, especially, the total cost over the life of the loan. A great mortgage rate should be the top factor when choosing a lender, but it’s not the only factor.
  • Low fees. It’s also important to consider what sorts of fees each lender charges. These, too, can have a significant impact on the cost of a mortgage, but I’ve found that many people ignore them. (Probably because the cost of the mortgage is so large that people don’t bother to question charges that seem so small in comparison.) Be sure to get a good-faith estimate whenever a lender or broker provides a quote.
  • Gut feeling. You should always trust your gut. If the broker seems shady, find someone else. It’s great to have somebody you enjoy working with, somebody who seems like a member of your “team”, somebody you trust.

You may have other specifications, for example if you are looking for low down payment fha loans, you’ll need to find out whether your particular broker is FHA and HUD approved to offer these types of mortgages.

When Kris and I bought our first home in 1994, we found our broker at random through the phone book. We didn’t bother to shop around. In 1998, we refinanced our home after finding a lender on the still-young World Wide Web. We chose the company because they had the best mortgage rates. When we bought our current home in 2004, we asked friends for recommendations, and ended up using a local broker who worked hard for us.

What about you? If you own a home, how did you choose your mortgage broker? Did you shop around? If so, were you just looking for the best rate? Or did you base your decision on other factors, too? If you were shopping for a new mortgage today, how would you choose a broker or lender?