Shopping for a Loan
There are thousands of mortgage lenders across the country, each with many different loan products. From lenders that will only sell to the most creditworthy borrowers (at the best interest rates), to lenders that will lend 50% of a property's value (at high interest rates), there's a mortgage product for just about everyone.
One place to check is your local bank. This can result in a reasonably good deal for the qualified customer. In many other cases, the bank will not have a program that fits your needs, or you may fall outside the guidelines of its lending ability.
Once you have visited your bank, look in the real estate section of your local paper for the rates at other banks. It's a good idea to start the legwork on your own, before bringing in a mortgage broker, so that you'll 1) avoid the hard sell from the get-go, and 2) have a better idea of what you could find on your own.
The Web lets you comparison shop, right from the comfort of your own computer. Not only that, but you don't have to hunt down a hundred different banks -- certain aggregator sites have done that for you. In fact, you might check out the loan services provided by our Home Center sponsors. Each of these companies can help you shop for the lowest mortgage rates.
By the way, there is no reason why you shouldn't take out a loan with a bank in California if you live in Virginia, or vice-versa.
Real Estate Agents
You might well find the cheapest rates in town (or in the country) on the Internet. If, however, you end up working with a real estate agent, you might feel more secure with a lender that has a relationship with your agent. The idea is this: The agent brings business to the lender, so the lender has some sense of responsibility toward honoring commitments with that agent's clients. There are, to be sure, legal protections for you, but a hassle is a hassle. This is not a reason to get a lousy deal, but, as Mr. Freud said, psychology counts. (OK, maybe he didn't say that, but he should have.)
When should I shop for a mortgage?
Ideally, you should find a lender and get "pre-qualified" for a mortgage before you ever start looking for a house. Not only will you feel more confident knowing that you'll have a certain amount of money (which can also narrow down your price range for potential houses), but you'll be a more serious candidate to sellers.
What information should I get from the mortgage company?
There are many questions to ask prospective lenders. You might find yourself feeling a little nervous. After all, you can feel like they have you by the... suspenders. But, don't think of it that way. You are going to pay them a lot of money for a very long time. They serve you, not the other way around. Don't let them take advantage of you or bully you into a deal that isn't to your advantage.
See our worksheet for lenders. Print it out and take it with you when you meet with a prospective lender.