When is the right time to shop for a mortgage?

Posted by  on Dec 19, 2012

Q: My husband and I are starting to look at houses, and we were wondering at what point in this process we should also start to shop for mortgages. It seems like a chicken/egg thing -- does finding a mortgage come first, or finding a house?

A: While you can't finalize a mortgage loan until you have found a house, the best idea is to have both processes going on in parallel. Specifically, there are three points in the home-shopping process at which you should also check on the mortgage market:

  1. At the very beginning. Really, before you see your first house, you should informally check up on the latest mortgage rates and run some scenarios on a mortgage calculator to see what kind of property you can afford.
  2. As you start to focus your search. Once you've seen some properties and have a clearer sense of what you're looking for, it would be a good time to start comparing mortgage lenders. Not only can you start to get a sense of who has the most competitive rates, but you can talk to lenders about their qualifying standards to make sure there won't be any problems with your getting a loan.
  3. Once you've had an offer accepted. Having done some advance work will help you act quickly once you have a deal in the works, which is good because the clock is usually ticking in those situations. Still, if things have changed materially, don't feel as though you are locked into a mortgage lender you may have talked to previously.

Naturally, the more compressed you can make the home-buying process, the less chance there is that there will be drastic changes in rates from the first stage to the last. For example, the Mortgage Bankers Association has forecast that current mortgage rates will rise by about 1 percent over the next year, so just be aware that those rates, like home prices, can be a moving target.

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