The Homebuyer’s Guide to Shopping for a Mortgage
Buying a house is one of the most expenses purchases that the majority of us will make. Even with that fact, many people do not even think of trying to shop around for a mortgage. Most people work with the first lender that they come across that approves them for a loan.
However, investing time shopping for the best mortgage deal can save you plenty of money over the life of your loan.
What to Compare
When you are looking for a mortgage lender there are several main details about the loan that you will want to compare from one lender to the next:
Rates – While rates will tend to be similar from one lender to the next, they can still differ slightly. With many purchases a slight difference will not be a big deal. However, when obtaining a mortgage, a little rate increase goes a long way.
For example, if you have a mortgage loan for $250,000, and the difference between two lenders offers is only half a percent (3% compared to 3.5%) you will end paying around $25,000 extra.
Loan Options – Lenders offer different options and the right one for you will depend on your situation. There are 30-year traditional loans, fixed rate loans, adjustable rate mortgages, and 15-year mortgages.
The Extras – Mortgage lenders are competing for customers, and that means that they will offer extra incentives to get you to use their services. Sometimes buyers can find lenders who are willing to cover some of the closing costs.
Fees – There are a number of fees involved with closing a mortgage, and not all lenders charge the same. Interview several lenders and ask them for a breakdown of the fees. This will allow you to compare apples to apples between lenders.
Requirements – Not all lenders have the same requirements. It is not uncommon for a buyer to get turned down for a mortgage and quit the process all together. Just because one lender denied your loan application does not mean that all lenders will.
Finding a Mortgage Lender
When you are ready to start shopping for a mortgage you need to know where to look. There are several places where you can obtain a mortgage:
Bank – The first place that many homebuyers think to contact about getting approved for a mortgage loan is their financial institution. If you have a good working relationship with your bank, this can be a good place to start. However, getting approved for a mortgage through a bank can be more difficult that working with other lenders.
Mortgage Broker – Finding a mortgage broker can be a great option because they specialize in mortgage loans. This means they know about all the different programs that are available and might be able to find you a program that helps your chance of being approved that you never would have known about on your own. Ask friends and family members for recommendations.
There are many places where you can compare mortgage rates online. Before beginning to work with a lender make sure that you have done your due diligence on the company to make sure they are legitimate.
Americans are used to comparison shopping for just about everything, so why not do the same for your mortgage loan? This can save you thousands or tens of thousands of dollars.