How to Shop For a Mortgage
When shopping for a home mortgage loan, there are important aspects to consider, including the various
types of mortgages, interest
rates, loan terms, additional costs and more. The following tips will help guide you through the process of
choosing the best mortgage for you:
1. Compare mortgage loan types and interest rates. You have to compare both mortgage interest
rates and types of loans when you get quotes. The type of loan is important, because it has a bearing on what you
will ultimately pay. You need to know the difference between a fixed rate mortgage, an adjustable rate mortgage and
a balloon-payment mortgage and then use the Internet to help you make comparisons between them. There are a number
of lenders who will allow you to compare mortgage loans instantly online and find the best deal for you, based on
your credit rating.
2. Review your credit report before applying for mortgage. You can contact each of the top three
credit reporting bureau separately (Equifax 1-800-525-6285,
Experian 1-888-397-3742 and
TransUnion 1-800-680-7289) or use one of the many online
sources that allow you to request copies of your credit reports. Update and correct all information relating to your
credit, because your lender will definitely review this report when considering your mortgage application.
3. Choose manageable payment terms. It's essential to be sure you can afford your monthly mortgage
payments, so before you sign on the dotted line you need to review your household budget,
calculate the amount you can afford for your monthly mortgage payment and choose your payment terms based on that. A 15-year mortgage, for
example, typically results in interest savings, but the monthly payment will probably be high. A 30-year fixed mortgage,
which is the more popular choice, usually results in a lower monthly bill.
4. Try "buying down" interest rates on your loan. Paying additional discount points to the lender
in exchange for reduced interest can lower the interest rate for a portion or the entire duration of your loan. This
option can be beneficial if you intend to keep your home for many years.
5. Negotiate closing costs. The buyer and/or seller are responsible for all additional loan costs,
such as the application, appraisal and credit report fees; the title search and more. It's in your best interest to
understand each of these fees and then negotiate who will be responsible for payment of each. These should be listed
in the closing costs in the lender’s Good Faith Estimate, which will be given to you by each lender.
Many lenders make home mortgage loans seem attractive, but there may be hidden expenses that lead to costly long-term
consequences. So be sure to go into the process as an educated consumer and ask questions that will help you get mortgage
terms you can live with for a long time to come.