Comparative Shopping For A Home Loan

Comparative shopping for a home loan or mortgage helps you get the best financing deals around. Just like when you buy a car, the price and terms on a mortgage are negotiable. Unless you want to pay sticker price and put needless money into your lender's pocket, it’s essential to compare all of the costs associated with any home loan. You can save thousands of dollars by shopping, comparing and negotiating.

Get Multiple Quotes From Different Lenders
Home loans are available from several types of lenders:

Thrift institutions

Commercial banks

Mortgage companies

Credit unions

Different lenders may quote you different prices, so you should contact several to make sure you're getting the best price. Through SPENDonLIFE.com you can submit one application and get up to 4 home loan quotes in minutes. You can then sit back and compare quotes to figure out which lender gives you the best deal. This service is totally free. We get paid for giving the companies an opportunity to compete for your business.

Lenders Vs. Brokers
Which is which and why should you care? Some financial institutions operate as both lenders and brokers. Brokers are usually paid a fee for their services that may be separate from and in addition to the lender's origination or other fees. So you'll pay twice. A broker's compensation may be in the form of "points" paid at closing or as an add-on to your interest rate, or both. You should ask each broker you work with how he or she will be compensated so that you can compare the different fees. Be prepared to negotiate with the brokers as well as the lenders.

Learn All You Can About Cost
Know how much of a down payment you can afford, and find out all the costs involved in the loan. Knowing just the the monthly payment or the interest rate is not enough. Ask for information about the same loan amount, loan term, and type of loan so that you can compare the information. Get this informationfrom each lender and broker:

Rates

Ask each lender and broker for a list of its current mortgage interest rates and whether the rates being quoted are the lowest for that day or week.

Ask whether the rate is fixed or adjustable. Keep in mind that when interest rates for adjustable-rate loans go up, generally so does the monthly payment.

If the rate quoted is for an adjustable-rate loan, ask how your rate and loan payment will vary, including whether your loan payment will be reduced when rates go down.

Ask about the loan's annual percentage rate (APR). The APR takes into account not only the interest rate but also points, broker fees, and certain other credit charges that you may be required to pay, expressed as a yearly rate.

Points
Points are fees paid to the lender or broker for the loan and are often linked to the interest rate; usually the more points you pay, the lower the rate.

Check your local newspaper for information about rates and points currently being offered.

Ask for points to be quoted to you as a dollar amount—rather than just as the number of points—so that you will actually know how much you will have to pay.

Fees
A home loan involves many fees. Every lender or broker should be able to give you an estimate of its fees. Many of them are negotiable. Some fees are paid when you apply for a loan (such as application and appraisal fees), and others are paid at closing.

Loan origination or underwriting fees

Broker fees

Transaction

Settlement

Closing costs

Courier fees

In some cases, you can borrow the money needed to pay these fees, but doing so will increase your loan amount and total costs. "No cost" loans are sometimes available, but they usually involve higher rates. Remember when you put a contract on any house, you'll have to put "earnest money" down - which is typically a small percentage of the property price.

Don't Forget To:

Ask what each fee includes. Several items may be lumped into one fee.

Ask for an explanation of any fee you do not understand.