In this season of deals, if there's anything you want to get a deal on, it's a mortgage. And mortgage deals are definitely out there, if you know how to find them. The right mortgage can save you thousands of dollars upfront as well as over the life of the loan, so take the time to comparison shop.
Here are the top 10 tips for shopping for a mortgage.
1. Get mortgage information from more than one lender. Don't just go to your personal bank. Shop around for mortgages as much as possible, not only at commercial banks, but at thrift institutions, credit unions and mortgage companies. It's the only way to make sure you've found the best price on your mortgage.
2. Make sure you know the difference between a mortgage lender and a mortgage broker. Mortgage brokers find mortgage lenders for you rather than lending directly (think of them as mortgage "personal shoppers"). Mortgage brokers have access to various lenders and can therefore provide you with more choices, but they charge fees. Also, mortgage brokers don't always make it clear that they are brokers rather than lenders, so you may need to clarify. If they are mortgage brokers, ask what the fees are and how they will be paid. And don't hesitate to use several mortgage brokers at once, or a combination of mortgage brokers and mortgage lenders. In other words, don't count on mortgage brokers to do all the work for you -- you have to do the shopping yourself to find the best mortgage.
3. Shop for your mortgage online. Mortgage terms you read in print media are often outdated by the time they're published, and you can't count on quotes a mortgage lender or broker tells you over the phone. Print out or link to mortgage terms, though, and mortgage lenders are more apt to honor them.
4. Compare apples to apples. When shopping around for a mortgage, it's not enough to just ask about the interest rate and the monthly payment. Obtain all information on the complete cost of the mortgage, including mortgage rates, points and fees. Ask all prospective mortgage lenders for information on the same loan amount, loan term and type of loan so you can effectively compare mortgages. Also, for adjustable rates, ask mortgage lenders to calculate how much your monthly mortgage payments will be a year, 5 years and 10 years from now. It might help to make a mortgage shopping list. You can find examples online, like the one here.
5. Negotiate. Once you've found the best mortgage lender and best mortgage loan, start negotiating for the best possible deal. Mortgage lenders and brokers often change their prices for the same mortgage to different consumers for no apparent reason other than they can pocket some of the difference in price as profit. Ask your mortgage lender or broker to put down all costs of the mortgage in writing, then request that they waive or reduce some of the mortgage fee or lower the rate or points. You don't lose anything by asking.
6. Don't assume credit problems will disqualify you from a mortgage. If you have minor credit problems or spots on your credit report as a result of one-time hardships, including illness or temporary loss of income, shop around for mortgage lenders and brokers that will sympathize and allow you to negotiate for a well-priced loan.
7. Shop for your mortgage on Fridays. To accurately comparison shop, you have to compare mortgage terms on the same day. Mortgage prices change daily. If you want a little more time to consider your findings, shop for mortgages on Fridays, since those mortgage prices will generally hold until Monday.
8. Lock in your mortgage rate. Once you've shopped around for the best mortgage rate and negotiated the terms of your mortgage, ask your mortgage lender or broker for a written lock-in to protect you from an increase in the rate while you complete the mortgage process. You may have to pay a fee for locking in the mortgage rate; if so, ask if you can get a refund of the fee at the closing of the mortgage. Also, if mortgage rates decrease rather than increase before closing, see if you can negotiate for some kind of break from the mortgage lender or broker.
9. Shop around for add-ons to your mortgage, too. If you let your mortgage lender dictate who will provide your third-party services, such as title insurance and appraisal, you'll probably be overcharged. Shop around for your own third-party providers-you can most likely find good deals online.
10. Understand what type of down payment and mortgage you can honestly afford. You've no doubt heard or seen the effects of people trying to buy more house than they could afford. Calculate your monthly expenditures to make sure you will be able to pay your mortgage, taxes, insurance, maintenance and utilities -- as well as pay for emergencies -- for several years. Like all good shoppers, you don't want to spend more on a mortgage than you can afford to pay.
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