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How to shop for a good mortgage
HOW TO 
Tags: mortgages, housing, real estate, lenders, banks, savings and loan, escrow, interest rates, payment
Shopping around for a home loan or mortgage will help you to get the best financing deal. A mortgage, whether it's a home purchase, a refinancing, or a home equity loan, is a product, just like a car, so the price and terms may be negotiable.
Here's what to look for when shopping for a home mortgage. What do you know?
| | RESEARCH CURRENT INTEREST RATES. Check the real estate section of your local newspaper, use the Internet, or call at least six lenders for information. |
| | 30-YEAR, 20-YEAR & 15-YEAR MORTGAGES. You can save thousands of dollars in interest charges by getting the shortest-term mortgage you can afford, but it doesn't make sense comparing a 15-year mortgage to a 30-year mortgage unless you want to see the difference in your monthly payment amount. |
| | ASK FOR DETAILS on the loan AMOUNT, loan TERM, and TYPE of loan from multiple lenders so that you can compare the information. Be sure to get the Annual Percentage Rate (APR), which takes into account not only the interest rate but also points, broker fees, and other credit charges expressed as a yearly rate. |
| | APR. This figure factors in all fees and expenses for the loan and is a helpful way to compare the cost of borrowing from one mortgage lender to the next |
| | FIXED OR ADJUSTABLE RATE? The interest rate on adjustable rate mortgage loans (ARMs) can vary a great deal over the lifetime of the mortgage. An increase of several percentage points might raise payments by hundreds of dollars per month. |
| | If a loan has an ADJUSTABLE RATE, ask when and how the rate and loan payment could change. |
| | REQUIRED DOWN PAYMENT. Some lenders require 20% of the home's purchase price as a down payment. But many lenders now offer loans that require less. In these cases, you may be required to purchase private mortgage insurance (PMI) to protect the lender if you fall behind on payments. |
| | If PMI IS REQUIRED, ask what the total cost of the insurance will be. How much will the monthly mortgage payment be when the PMI premium is added and how long you will be required to carry PMI? |
| | Ask if you can pay off the loan EARLY and if there is a PENALTY for doing so. Mortgages that do not have prepayment penalties are better offers than those that do. |
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