Four Best Ways to Shop for a Mortgage

There are several ways to shop for your financing, and we recommend that you use a combination of all of them. Start by looking in the local newspaper. Most papers print a weekly summary of mortgage rates in your area, and this summary includes most of the information you'll need in order to start comparison shopping.

Then start calling national banks that have a presence in your market. Simply pull out the Yellow Pages and start shopping. Tell each bank the approximate size of the mortgage you are looking for, and it will tell you about some of the basic financing plans it has available. Even if you don't ultimately do business with a particular bank, this will give you a window into the competitive rates and terms.

The third strategy is to shop online. There are now some excellent sources for mortgage shopping, and the offers we have seen have been good. Two sources to start with are www.lendingtree.com or www.ELoan.com. Online companies like these will ask you to complete an extensive credit application, which they send out electronically to the lenders they work with. Based on the application and your credit report (which they will obtain), you will get specific offers from those lenders that qualify you for the loan.

The fourth shopping method is to use a mortgage broker to represent you. Make sure you are working with a broker who represents multiple financing sources, rather than one who's simply
a captive broker for a single lender. You want the broker to use her expertise and to shop for your Loan by submitting it to several lenders.

Understand that using a mortgage broker costs you money. That is the way mortgage brokers make their money, and there is nothing wrong with that. On the other hand, the fee you pay is likely to come in the form of higher interest, and, depending on how long you keep the property, that cost could add up to a lot. Compare the interest rates quoted to you before you make a final decision. Ask each of your lenders or brokers to specifically quote you the annual percentage rate (APR) on the loan. The APR is a special qualification that adds all of the fees you pay on the loan to the interest to give you an interest rate that can be compared on an apples-to-apples basis. Remember that even a quarter of a point over the life of a 30-year loan can amount to a lot of money, so bargain down those rates.

If you find that you are having trouble getting a loan, it may be because of something in your credit report. If you are turned down for a loan, you can get a free copy of the credit report that the lender used to make its determination. Make sure you order the report to see if there is a problem, and also to determine if the report is even accurate. You need to watch your credit rating, and how to build the highest possible one for yourself. It takes some work to improve your credit score, but it is worth it.

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