How to Shop for a Mortgage in Austin, TX
As a real estate agent, one of the most important services I offer my clients is helping them navigate the often-confusing world of mortgage lending. Choosing the right lender can make or break a transaction—and the process starts before you find the perfect home. Here's what you need to know to shop smart and avoid surprises.
Start with the Basics: Know the Different Types of Lenders
Before you even start house hunting, it’s a good idea to understand how mortgages work. There are several types of lenders, all of which have their place:
Mortgage brokers act as matchmakers between you and lenders. They can shop rates and loan programs across multiple banks and lenders. They’re a third party, not the actual source of the loan.
Banks offer loans directly to the consumer. There are the huge banks that are household names and also small local banks. Depending on the bank, service can be less personalized and loan programs might be more limited.
Credit Unions often have competitive rates and lower fees, but you may need to be a member. Often becoming a member is easy, inexpensive, and worth the effort.
Each type of lender has its pros and cons, and it’s important to compare more than just interest rates—look at fees, closing timelines, and responsiveness. There are also some lenders who are a mixture of these types. For example, some banks may act as both a broker and a lender, choosing to service some loans and shop others to outside investors.
How Lenders Make Money (And Why It Matters)
Lenders earn money in a few key ways:
Origination fees: These are upfront costs charged for processing your loan, usually around 0.5%–1% of the total loan amount. Origination fees are negotiable! And in some cases, lenders may waive origination fees altogether. Learn more from Investopedia or NerdWallet.
Interest: The amount you pay over time for borrowing money. Buyers often make the mistake of focusing solely on interest rate and ignoring other costs and loan terms.
Discount points: Discount points is money you pay a lender up front in exchange for a lower rate. That rate buydown can be permanent or temporary depending on the loan program.
Selling the loan: Many lenders sell loans on the secondary market for a profit. This doesn’t usually impact you directly but can affect how your loan is serviced after closing. No matter what type of lender you choose, it’s highly likely your loan will be sold to a different servicer at some point.
Understanding how your lender earns money can help you spot inflated costs or unnecessary fees when reviewing your Loan Estimate.
Loan Estimates: Read the Fine Print
When you're comparing lenders, by law you’ll receive a Loan Estimate from each one within 3 days of submitting a completed loan application. This is a standardized form designed to make comparison easier, but not all estimates are as equally helpful.
Pay close attention to the property tax and homeowners insurance estimates. These are just that—estimates—and they can vary significantly between lenders. Some lenders tend to estimate on the high side. While this might make your projected payment look higher, it's actually a good thing: You're less likely to be caught off guard later.
Other lenders might underestimate these costs, making their estimate look more attractive. Don’t be fooled. That “lower payment” will likely go up once accurate tax and insurance numbers come in. Better to be overprepared than blindsided.
Resale Homes vs New Construction: Choose Your Lender Strategically
If you're buying a new construction home, the builder will often offer serious incentives—such as thousands of dollars in closing cost credits—if you use their preferred lender. In most cases, it makes financial sense to take them up on it.
But if you’re buying a resale home, I strongly recommend using a local lender. Here’s why:
Local lenders have reputations to protect in the community. They work harder up front to ensure you are paired with the right loan program (for your finances and for the property you want to buy), that you qualify, and that you close on time.
They are usually more responsive and easier to communicate with than national banks or online lenders.
Listing agents notice when buyers use local lenders, and it can make your offer more appealing in a competitive market.
For the record, I don't receive any kickbacks or financial incentives from the lenders I recommend. I simply know from experience who delivers results. If you’d like my list of trusted local lenders, just reach out.
Final Thought: Don't Rush the Loan Process
Shopping for a mortgage takes time and effort, but it’s worth it. According to the Federal Trade Commission, even a small difference in interest rates or fees can cost—or save—you thousands of dollars over the life of the loan.
Here’s your quick checklist:
✅ Before you get started, register to avoid Spam calls
✅ Compare at least three Loan Estimates from different types of lenders
✅ Talk to lenders about different loan types—including conventional, FHA, VA, etc.—as well as special programs such as down-payment assistance.
✅ Understand what you're paying in fees, interest, and other costs
✅ Ask questions about taxes and insurance estimates
✅ Be cautious with “too-good-to-be-true” payment quotes
✅ Leverage a local lender when buying a resale home
✅ Consider preferred lender incentives when buying new construction
Buying a home is a big deal—your mortgage should be a tool, not a trap. Let’s make sure you're set up for success.
Need help connecting with the right lender? I’ve got your back—send me a message and I’ll introduce you to some of the best in the business.