Shop Around. Shopping around for a home loan or mortgage will help you to get the best financing deal. A mortgage--whether it?s a home purchase, a refinancing, or a home equity loan--is a product, just like a car, so the price and terms may be negotiable. You?ll want to compare all the costs involved in obtaining a mortgage. Shopping, comparing, and negotiating may save you thousands of dollars.

Obtain Quotes From Several Lenders. Mortgages are available from several types of lenders?thrift institutions, commercial banks, mortgage companies, and credit unions. Different lenders may quote you different prices, so you should contact several lenders to make sure you?re getting the best price for the mortgage. You can also get a mortgage through a mortgage broker. Brokers arrange transactions rather than lending money directly; in other words, they find a lender for you. A broker?s access to several lenders can mean a wider selection of mortgage products and terms from which you can choose. Brokers will generally contact several lenders regarding your application, but they are not obligated to find the best deal for you unless they have contracted with you to act as your agent. Consequently, you should consider contacting more than one broker, just as you should with banks or thrift institutions. It?s important that 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.

Obtain Cost Information. Be sure to get information about mortgages from several lenders or brokers. Know how much of a down payment you can afford, and find out all the costs involved in the mortgage. Knowing just the amount of 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. It is important to get from each lender and broker the rate, points, fees and other costs relating to the mortgage.

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. It is also important to understand whether the rate is fixed or adjustable. Keep in mind that when interest rates for adjustable-rate mortgages go up, generally so does the monthly payment. If the rate quoted is for an adjustable- rate mortgage, ask how your rate and mortgage payment will vary, including whether your mortgage payment will be reduced when rates go down. Finally, ask about the mortgage?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 mortgage 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 mortgage often involves many fees, such as loan origination or underwriting fees, broker fees, and transaction, settlement and closing costs. Every lender or broker should be able to give you an estimate of its fees. Many of these fees are negotiable. Some fees are paid when you apply for a mortgage (such as application and appraisal fees), and others are paid at closing. In some cases, you can borrow the money needed to pay these fees, but doing so will increase your mortgage amount and total costs. "No cost" mortgages are sometimes available, but they usually involve higher rates. Ask what each fee includes. Several items may be lumped into one fee and ask for an explanation of any fee you do not understand.

Get the Best Deal You Can Negotiate. Once you know what each lender has to offer, negotiate for the best deal that you can. On any given day, lenders and brokers may offer different prices for the same mortgage terms to different consumers, even if those consumers have the same mortgage qualifications. Have the lender or broker write down all the costs associated with the mortgage. Then ask if the lender or broker will waive or reduce one or more of its fees or agree to a lower rate or fewer points. You?ll want to make sure that the lender or broker is not agreeing to lower one fee while raising another or to lower the rate while raising points. There?s no harm in asking lenders or brokers if they can give better terms than the original ones they quoted or than those you have found elsewhere.

Once you are satisfied with the terms you have negotiated, you may want to obtain a written lock-in from the lender or broker. The lock-in should include the rate that you have agreed upon, the period the lock-in lasts, and the number of points to be paid. A fee may be charged for locking in the mortgage rate. This fee may be refundable at closing. Lock-ins can protect you from rate increases while your mortgage is being processed; if rates fall, however, you could end up with a less favorable rate. Should that happen, try to negotiate a compromise with the lender or broker.