How to Shop for a Mortgage

How to Shop for a Mortgage

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The mortgage market is more complex than it was before the last recession hit, making it more difficult for consumers to obtain financing. Tighter lending requirements, more stringent federal oversight and a persistent abundance of homes in foreclosure continue to affect the market. You can shop for a mortgage and get approved for your home loan if you keep the following in mind.

1. Contact several lenders. Do not rely on just one lender to offer you information about mortgages. Plan to contact at least three lenders including your current bank, a credit union and other mortgage providers. Expect to be quoted different prices from each lender; consider using a broker that you have contracted to find you the lowest rate advises the Federal Reserve. A broker contract is important otherwise this professional may not be looking out for your best interests.

2. Understand your costs. When obtaining a mortgage, you will be quoted an interest rate, learn its loan length and know the down payment required to make this loan happen. To adequately compare your various loan options, you will need complete details from each offer. Rates, points and fees can vary; you’ll want a full and complete disclosure on your closing costs too.

3. Supply your documentation. You will need to furnish specific documents to your lender as condition for receiving a loan. These loan documents include receive pay stubs, your federal income taxes for the past two years and your bank statements. If you are self-employed, your lender may require that you furnish a profit and loss statement, proof of payment for your quarterly taxes or an asset statement reflecting your cash accounts.

4. Negotiate for the best deal. After comparing as many as five or six loan offers, you may be satisfied with the loans as presented to you. However, you can still negotiate with your lender to obtain the best deal possible. Your interest rate is based in part on your credit rating. If you have excellent credit, a score about 750, you should be offered the most competitive rate. Closing costs are another matter for negotiation and some of those costs can be absorbed or waived by your lender. Once you have found the mortgage that you like, lock-in the rate to protect you from possible rate increases.

5. Agree to your loan. As soon as you know which loan is right for you, notify the lender that you accept his or her terms. Get this information in writing and work diligently to bring your home to closing. If your home closing falls outside of the lock-in period, your loan rate might change. Work with your real estate agent to ensure that all inspections are completed on time.

Loan Considerations

Use a mortgage worksheet to compare various loan offers. Include all data such as points, escrow costs, property taxes, homeowners association fees and insurance. Evaluate your offers based on this information and then make your decision based on the information at hand.

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About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Auto Trends Magazine", an online publication. Matt covers campus, consumer, business and financial topics on various websites and weblogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".