Difficulties of finding the best rate Shopping for a mortgage can be one of the most frustrating experiences in one's life. If you find yourself confused by the whole process you are not alone. The process is designed to be confusing. Remember that most lenders want borrowers to be confused. A confused borrower is easy prey for an experienced loan officer who can pretend to be helpful. Those who need help will most often pay a premium for it. In the world of mortgage's this process of confusion and false help has a fancy name, most banks and lending institution call it: Good Service.

The shopping process initially seems simple, just compare rates and pick the lowest one. After a few phone calls with evasive loan officers one can begin to realize that it is almost impossible to compare one lender to another. It can almost seem that lenders are trying to make comparisons difficult in hope of having you get exasperated and just choose them. One wonders: Where can I get straight answers and how can I possibly make sense of it all? Do not worry! Shopping for a loan is easy if you know how to shop. This article is designed to teach you the right questions to ask and give you the tools to compare one loan to another quickly. Read the article, follow the instructions, use the spreadsheet provided, and soon you will see how easy getting the best deal can be!

Understand what you are looking for

The first step to getting the best price is choosing the mortgage program that is best for you. The best price on a loan that does not fit your specific needs may cost you much more than getting a fair deal on the proper mortgage. Browse through which type of loan is best for me? to help you decide which loan to choose. Only after you choose the type of loan your looking for can you go to the next step and shop for the best rate.

Comparing Apples to Apples One of the difficulties of shopping for a mortgage is that lenders all seem to have their own way of expressing costs. The key to shopping for a mortgage is to limit the variables. First, always compare lenders rates from the same day. Rates change daily and perhaps more than once a day.

For example:

Lender "A" may always have the lowest rate, and you call them on Monday and their rate is 8%. You call lender "B" on Tuesday and their rate is 7.75%. You may assume that lender "B" has the better rate, and you would be wrong. Because if you called lender "A" on Tuesday you would have found that their rate was 7.625%.

BE CAREFUL!- Some lenders offer very short lock-in periods (15 to 30 days) in order to be rate competitive. Remember, if your loan does not get closed in that time period, you lose the rate.

            Always ask the length of the lock for the rate you are quoted.

Best Rate or Best Deal?

A common mistake shoppers make is to ask: "What's your best rate?". It is a logical question to ask, but does not give the responses most borrowers need to make a proper decision. Borrowers must understand both rates and fees. Rates are only half the answer of getting the best deal. It is possible end up with the lowest rate but not necessarily the best deal..

For example:

For a $100,000 loan on a 30 year fixed Lender A has a rate of 8% with 0 points 1% origination fee and $400 in lenders fees. Lender B has a rate of 7.625% with 3 points 0 origination fee and $800 in lenders fees. Which has the better rate? Lender B has a lower rate, but the loan costs $2400 more at closing. The real question is which is the better deal?

Hint:

The question you are trying to answer is: At the rate I am shopping for which lender is going to charge me the least amount of money.

Understanding Fees

Fees should be broken down into four categories

• Discount points and Origination fees- convert these fees into dollar figures to better understand associated costs.

For Example: 1 point is 1% of the value of the loan. A discount point or origination fee of one point would equate to $1000 on a $100,000 loan.

• Appraisal, Credit report and Application fees- These fees do not vary greatly between lenders, but they do vary, sometimes as much as $150. Also find out if the application fee is applied toward closing costs or if it is a fee in addition to them.
• Miscellaneous Lender Charges a.k.a. (underwriting, processing , tax service, flood zone certification, funding fee, courier fees, wire transfer fee. Etc.) This is the category where most lenders hide their fees .
• Title/ Settlement charges- Includes: title search, closing fee, survey, pest inspection, Paid to a separate company from the Lender. You should shop around for the best deal on this just like you do for a mortgage.

Step by Step process to get the "Best Deal"

• Pick the program that best suits your needs
• Choose the rate you want First. By choosing the rate first you eliminate one of the variables. You can now find out exactly which lender is charging you the least amount of money for the loan that you want.
• Construct a shopping Spreadsheet like the one provided below. Costs based on 30 Year Fixed $100,000 Loan with an 8% Rate.

• Ask the lender for a Good Faith Estimate of Settlement charges to verify if they are willing to put their pricing claim in writing.
• Shop for a Title company Settlement agent- These companies are responsible for your closing, title insurance and other closing costs. Their costs vary much the same as mortgage lenders. Be sure to get the deal that is best for you. Ask your Federated Lending Loan Officer about how you can save money by combining title services with your loan.  

Now you are ready to Shop. Good Luck! We have included a blank spreadsheet to assist you in your search.

• At Federated Lending Corporation the Application fee is not an additional fee!
• Print the spreadsheet below.