How To Shop Around For A Mortgage

Shopping around for a mortgage can be daunting. We shop through our realtor and online. We ask our family and friends who are in the market for new homes. And, just like we suddenly experienced an epiphany, we finally go to our banker and get a real comparison.

Your banker is the best place to start, because they already have a history with you. Some of us have been with the same banker for decades. We've established a relationship with them and a credit line with them, but we are reluctant to attempt to get a mortgage with them. Of all the options, your banker is the most likely to be flexible with terms. Sometimes they have programs that allow for closing costs to be paid or reduced interest rates for banking clients. Get a quote from your bank and then start the shopping around. The best way to get a good rate is to pit one financial institution against another. When banks compete for your business the rate is the best rate for you and your financial circumstances.

Your next stop should be to work with one or more brokers. You might not find the best rates there, but remember this is for comparison. You'll have a better idea with whom you will want to work, after you start to talk to them about your situation. You may have a unique situation that requires special attention. The broker who demonstrates a willingness or better understanding of your situation may be the choice you make.

Because your credit score drops when you have credit checks run by financial institutions, try to use the same report as often as possible. Carry a copy of your report with you when you are shopping and do all of your shopping in a 3-6 month period, so mortgage companies will understand that the inquiries are for mortgages.

Between your bank and the brokers you should locate a competitive rate. Don't be confused by comparing your rate offers to your friend's who could have a very different credit profile than yours. They may also be getting an adjustable rate or an interest only mortgage. You must compare apples to apples, not grapefruit to apples. If you don't know the person intimately, don't assume their rate is better than yours.

Your last point of comparison would be an organization like the online company, the Lending Tree. These types of mortgage clearing houses give you a wide range of mortgage options. They may even include banks from different regions of the country. Then you will have a quote from your bank, one or two broker's quotes and a couple of quotes from the Lending Tree or similar organization. At this point you will know what the best mortgages and rates are for you and your financial situation.

Examine each mortgage and the terms. See if the institution will give you an amortization schedule (or calculate your amortization with excel). This will give you an excellent idea of the total cost of your mortgage. You will have all the details about the mortgages that matter the most at your fingertips. Shopping around for a mortgage will get easier and easier when you do it the right way once.