When beginning to buy a home, a major part of the process is the mortgage. Everyone tells people to look around before purchasing a mortgage to make sure they are getting the best rates possible. This is very good advice, the key though, is to know how to shop around for a mortgage. These tips will help you figure out what questions to ask and what to be aware of.
- Gain a baseline: This is the first step of finding a mortgage. Ask people you trust, such as your real estate agent. Maybe someone that just purchased one and is happy with his/her decision. Ask them if they have a lender they can recommend. Then meet with that lender, get your credit score and just discuss some of the loan options. Have that lender discuss with you what he believes would be the best choice and have them explain to you all the terms. This will be helpful because even if you do not go with that lender, you will know what loans appeal to you when speaking with other lenders.
- Mix it up: Check out different financial institutions. Mortgage rates tend to fluctuate because of promotional purposes. A bank may lower the rate to generate more activity with their mortgages. A credit union may introduce a new loan and promote it by lowering the rate. If you check into multiple different businesses, you are more likely to get a great deal.
- Ask about fees: This is a big one! When searching around for mortgages, make sure to ask about the fees it will take to close the loan. This is important to do during the searching process because they vary. You could be easily fooled by a low mortgage rate but then have to pay a ton of closing fees on top. Also, if all the fees are put into a “loan preparation” field, feel free to ask for the breakdown of fees.
- Paying points: Points on your loan are equivalent to 1 % of the interest rate. Talk with your lender about your plan for the home and decide if it is worth it to pay off points or not. If you are planning on having the house for a while, it may be worth it to keep your interest rates down.
The biggest tip is to be open and to understand what is going on. You want to make sure that you understand everything that is happening and all the terms and processes within to make sure you are choosing the right loan for you!