How can I get a fair deal on a mortgage?

Posted by  on Apr 23, 2014

Q: I've never taken out a loan before, but I am thinking of getting a mortgage. I'm afraid of being taken advantage of because I do not know much about it. How can I make sure I'm getting a fair mortgage rate?

A: As confusing as the mortgage business can seem to an outsider, just remember you have one very valuable thing going for you: It is a competitive market. If you look at multiple mortgage lenders, you won't have to rely on any one lender to give you an accurate view of market conditions.

Here are five tips for mortgage shopping:

  1. Use online resources to gather information. Don't feel you have to contact lenders one by one when there are websites that provide information on a variety of lenders and help you compare rates.
  2. Narrow down your search. There is nearly a full percentage point difference between 30-year and 15-year fixed mortgage rates, and nearly another percentage point difference between those and 1-year adjustable-rate mortgages. So, before you start comparing rates, you need to settle on what type of loan you want.
  3. Get multiple mortgage quotes. To determine the best mortgage rate for your situation, you need to get quotes from different lenders that are based on the specifics of your credit history and loan request.
  4. Look at a payment schedule. The best way to understand the dynamics of how a loan will play out is to look at a list of all the payments you will make over the life of a loan.
  5. Make sure all fees and charges are included in the payment schedule. Mortgage rates are not the only variable. There are different fees, points, and other charges to account for, so make sure these are included in any payment schedule you review.

Beyond those shopping tips, there are two absolutes when it comes to a decision of this magnitude: Get any representations or promises made in writing, and don't sign up for something you don't understand.

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