Home > Mortgages > How to Shop For a Mortgage

Comments 0 Comments

Are you getting ready to shop for a mortgage? You may be intimidated by stories about how much more difficult it can be to qualify these days, but don’t let that stop you. Borrowers are still getting loans, and when they do, their rates are often remarkably low. Still, to land a sweet deal you’re going to have to find it. Here’s how:

Get Organized

You will be gathering and reviewing lot of information during this process, so find a way to collect and compare it from the start. Notes on the back of an envelope won’t cut it here. HUD offers a free good faith estimate form you can print and use to compare various loan offers. It’s not perfect, but it is helpful. And the CFPB is also working on easier-to-understand standardized mortgage disclosure forms. They are still evaluating feedback on the proposed form, but in the meantime, you use it as a guideline when you shop. Just fill in the blanks yourself as you talk with prospective lenders. (And if there’s anything you don’t understand on the form, you still have time to share your feedback with the CFPB!)

Check Your Credit

You knew I was going to say this, right? Without this information, you’re shooting in the dark. If you haven’t done so already, get your free credit reports from all three major credit reporting agencies. Purchase your scores or get a free credit score tool (like Credit.com’s Credit Report Card) to get an idea of where your credit stands. Your credit score is very likely going to figure into the rate and program for which you qualify. If you will be applying with a co-borrower, make sure he or she does the same.

Know What You Want

Fortunately many of the exotic loans, such as “pick a payment” loans, disappeared in the mortgage meltdown. And with rates as low as they are today, it usually makes sense to get a fixed-rate loan. So your basic decision may be easier than in the past: Do you want a 30-year or 15-year fixed rate? This allows you to compare costs for the same type of loan with multiple sources.

You’ll also need to know how much you can realistically afford to pay each month without painting yourself into a financial corner. I remember talking a few years back with a loan officer during the housing boom who said that when her clients told her they were being cautious about borrowing too much, she’d praise them. “Good for you, that’s smart” she’d say. And when clients told her they wanted to borrow as much as they could qualify for, she’d say, “Good for you. You deserve it!” Your loan officer can tell you how much you qualify to borrow, but you are the only one who can really assess how much you can afford to pay each month.

Try Different Sources

This is where shopping gets confusing. Once you start applying, you will get quotes from various lenders. Understand that without a full application and credit review, it is difficult for a loan officer to give you an accurate rate quote. There are a number of factors that go into determining which program and rate you qualify for, and small differences can change your quote dramatically. Also understand that once you start shopping, your personal information may be sold as a “lead,” resulting in sales pitches from other lenders.

There are several places you can shop:

  • Online mortgage quotes can provide you with multiple quotes from a variety of lenders who offer loans in your geographic area. This can help you gather a lot of information about prospective lenders quickly. Again, though, you need to understand that when you provide a minimum of information to obtain a quote, you’ll get a quote for an advertised rate that may or may not apply to your situation.
  • A local bank or credit union may be able to offer you an attractive rate that may beat out other options. It’s often easy to join a credit union, so even if you don’t currently belong to one, don’t rule that option out. And your bank may offer you a deal in order to continue to build on the relationship.
  • A mortgage broker will be able to shop your loan among multiple lenders to try to find the best deal. While they were maligned for putting borrowers into bad loans during the housing boom, if you find a broker you can trust with plenty of experience, it can be more like working with a trusted financial planner than a huckster just hoping to make a quick buck.

Make it a Sprint, Not a Marathon

If you limit your mortgage loan shopping to two weeks or less, you’re less likely to do damage to your credit scores. If you supply your Social Security number on an application, you can assume the lender will pull your credit reports and scores. And every credit pull generates an “inquiry.” Multiple inquiries in a short period of time can lower your credit scores. But when it comes to mortgage-related inquiries, those within a short period of time — anywhere from 14 to 45 days depending on the scoring model being used — count as one.

No Pain, No Gain

The truth is, mortgage shopping can be frustrating. There will be times when you feel like the lender is asking you for way too much information, or you’ll feel like the process is never going to end. But keep it in perspective. If you are successful in getting a new home loan or refinancing, you’ll likely get a loan at historically low interest rates that will benefit you for years to come.

Image: Spacecat, via Flickr

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team