Source: Bankrate —
Before you choose a mortgage offer, it’s important to shop around and compare multiple offers to get the best deal. In fact, borrowers can save an average of $1,500 over the life of a mortgage by simply obtaining one additional quote. And those who obtain a total of five quotes can save an average of $3,000, according to a study conducted by mortgage underwriter Freddie Mac.
Why compare mortgage offers?
Shopping around for a mortgage is an important step to ensure that you’re getting the most competitive rate and mortgage terms possible. It’s an effort that can save a substantial amount of money up front and over the life of a mortgage as well. Even an interest rate savings of as little as 0.1 percent, for instance, can result in thousands of dollars remaining in your pocket over the life of a mortgage, according to Bankrate’s mortgage amortization calculator.
In addition, many homebuyers don’t realize that the price and terms offered on a mortgage may be very different from one lender to the next, as each lender sets its own underwriting guidelines. You may even be able to negotiate mortgage costs with a particular lender.
Because a mortgage is one of the most substantial financial commitments you’ll make in a lifetime, it’s important to do your due diligence and ensure you’ve investigated all of your options thoroughly.
How to shop for a mortgage
Step 1: Determine the right type of mortgage for you
Before you embark upon mortgage shopping, it’s important to determine what type of mortgage you want to apply for and what might be best for your unique financial situation, as well as your short- and long-term goals. Some of the questions that can help identify the most suitable mortgage for your needs include:
- Where are you in your life and how long do you intend to stay in the home?
- Are you single?
- Are you planning to have children?
- Are you likely to change jobs in the coming years?
- Is your income stable or likely to fluctuate?
- How much of a down payment will you bring to the table? Do you have 20 percent or will you need a mortgage program that requires a smaller downpayment, such as 3 percent?
- What is your credit score?
- Will you be shopping for a particularly expensive home that may require a larger loan than conventional loan limits?
Answering these questions will help determine how long you plan to stay in a home and thus the best loan term for your needs. Some of the additional questions can also help you narrow down whether it makes sense to apply for a fixed-rate or adjustable-rate mortgage and hone in on the specific type of loan program that you may want to apply for based on the size of your down payment, loan needs or credit score.
Some of the mortgage options to consider include a conventional mortgage, government-issued mortgages such as an FHA loan, USDA loan, or VA loan, fixed rate mortgage, adjustable-rate mortgage and a jumbo loan.
Step 2: Gather the necessary documentation
