Shopping around for a mortgage may help you find the financial terms that work best for you and save you thousands of dollars in interest costs over the course of your loan. Here are few tips to get started:
Contact at least three lenders on the same day
Mortgage rates change daily, and vary by lender, so it’s important to contact lenders on the same day and check in with at least three lenders. Reaching out to multiple lenders on the same day will also help protect your credit score; if you make several inquiries within a short period of time, credit bureaus typically recognize you’re shopping for a home loan and won’t lower your score.
Give each lender the same information
Provide each lender with the same information, so you can compare the loan terms you receive in the fairest way possible. This will include telling your lender the potential cost of your new home, your income, the type of loan you’d like and for how long (e.g., a 30-year, fixed-rate loan), your Social Security number (for pulling up a credit report) and the down payment you can afford. Eventually, you’ll also need to provide information such as proof of income, tax returns and statements for any bank, credit and retirement accounts.
Add up all the lender fees to confirm cost
Buying a home is always more than just paying for a mortgage; typically, lenders change a variety of fees, too. These fees include those for processing your loan, recording your mortgage as a public record, closing fees and the cost of hiring an attorney to represent the lender during the buying process. Take all these costs into account when shopping for a mortgage, as fees vary by lender. Also ask lenders to provide you with an annual percentage rate (APR), which will include both an interest rate for your mortgage and any associated lender fees.
Know when to lock in the rate
Ask lenders about their rate-lock policies. These will let you lock in a desirable mortgage rate so you won’t have to pay more if interest rates move up before you close on your purchase. Depending on the lender, borrowers usually have between 30 and 60 days to close before the rate lock expires. By the same token, ask your lender for a possible “float down” if interest rates drop.
The information in this article is accurate as of the date of publishing.