Mortgages and How to Shop for Them

Unless you have stellar credit, mortgages are tough to get these days.  So before you go mortgage shopping, check your credit reports.  Do this about 45 days before even applying for a loan.  There may be things in your credit report that need fixing.

You can Google as to where you can get your credit reports for free.  You have to pay for your score, but to fix information in your credit reports that is wrong, this will be fine.  You then can start working with the credit reporting agencies to correct any bad info.

Once you start shopping, go to a good number of lenders to get their terms.  It would help to get information from a dozen or so lenders as their loan terms change often.  If you check the real estate listings in your local paper or, even better, a larger urban paper, you can often find advertisements for loan terms from banks and other institutions in the area.  Hiring a mortgage broker can help you filter all of the info so you don’t get bogged down.  If you hire a broker, be sure to ask him how he will be paid. Sometimes it is a percentage added to your payment, and sometimes it’s points at closing.  It’s always best to be prepared.

So you check local lenders first, then you go online.  There are several different types of lenders online. Be careful!  No all of them are honest.  Watch out for the fine print.  You can use government websites like fanniemae.com, freddiemac.com or hud.gov research mortgage rates before you even go to a lender site.  There are other tools and mortgage calculators out there.  Do your research before going to a lender site.

Some websites lend directly to the consumer, but you have to actually call them or go in person to get the details of the loan.  Some loan websites put your request for a loan up for an auction (see lendingtree.com), and some are multi-lender sites that allow you to fill out the paperwork (Quickenloans.com), then they send it on to the lender for approval.

When you do your shopping, make sure you have comparable numbers from each institution.  Ask them for interest rates, points, fees, and down payments for a loan of the same amount, loan term, and type of loan so you can compare the numbers.

Points are fees you pay to the lender for obtaining the loan.  Usually, the higher your fee, the lower your interest rate will be. When comparing loan providers, ask how many points you will have to pay and ask for them in the form of a dollar amount for easy reference.

There are other fees included in your loan amount.  Sometimes fees are put together into one fee, so ask the prospective lender to break down what each fee includes.
Once you’ve pared down the list of lenders to just a few, go in and try to negotiate the price down.  There are often in overages in the price of the loan quoted, which translates into the broker’s or loan officer’s commission.  So try to put some of that money back into your pocket.