Do you know how to shop for a home loan?

For some people it can be quite intimidating, but if you do some pre-work, understand your home buying rights and ask the right questions - you should be able to distinguish between a good deal and a great deal.

Who can lend you money? - Banks, thrift institutions (savings & loan companies or banks), commercial banks, mortgage companies, credit unions, and mortgage brokers.

Mortgage Brokers - arrange the deal not actually lend you the money. In other words, they shop for your loan product for you. Sometimes, because of their business contacts they can contact several lenders at once and get a variety of terms for you. Remember, even though they may shop several lenders they don't necessarily bring you the best deal on your behalf - the only exception to this is when you signed a contract for them to represent you as an agent. Unless they are your agent - you should consider calling more than one mortgage broker.

Sometimes the lending company will act as both a broker and a lender - for that reason be sure to ask whether a broker is involved in your loan. It's important because there could be additional fees being paid to them and added on to your closing costs.In fact, ask every broker you work with about how they will be compensated.

Compare - Just as you would when making another purchase like an auto loan, furniture or major appliances - call several lending companies and ask about their rates, down payment, fees, points, etc. The difference could save you lots of money.

Ask questions about....Rates - find out if the rate quoted is today's rate or the weeks/months average rate. Is the rate adjustable or fixed? Find out about broker fees and points. (Points are fees paid to the lender or broker for the loan); most of the time points and interest rates are joined together - so the more the points the lower the interest rate. Don't accept a quote of the total points - ask for the lender to quote you in terms of dollars and cents - not numbers.

Fees - Ask the lender what fees will be associated with the home closing, ask them to itemize each fee individually rather than have them quoted into one lump item marked 'fees'. There will be things like loan origination, underwriting, transaction, settlement, application and appraisal fees. In some cases you may be able to get a No Cost loan - but usually in these situations the rates are higher.

Mortgage Insurance - What are the down payment requirements? What percentage will you need to pay? Ten percent...twenty percent? Anything less than twenty percent will result in your purchase of PMI (private mortgage insurance), this ensures the lender that if you fail to pay your mortgage the loan will be insured to protect the lender.

After you have a good list of items to compare one lender against other - you can make a decision on choosing a lender. Remember to ask for price reductions - this is the time to try and negotiate. Whether it's asking for a lower interest rate, less points to pay or a reduction in fees - ask for a discount then get it in writing. In most cases, the lender has room to negotiate fees.

Lock-in - Learn to watch the rates. When you are ready to lock-in your rate, contact your mortgage lender. If the interest rates go up before you close you will be protected with the lower rate. On the other hand, if the rate drops - you are locked into your chosen rate.

The team at CasaNuevaGuide.com has created a mortgage shopping worksheet available for you to download.

Fair Lending Is Required by Law
The Equal Credit Opportunity Act prohibits lenders from discriminating against credit applicants in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age, whether all or part of the applicant's income comes from a public assistance program, or whether the applicant has in good faith exercised a right under the Consumer Credit Protection Act.
The Fair Housing Act prohibits discrimination in residential real estate transactions on the basis of race, color, religion, sex, handicap, familial status, or national origin.

Under these laws, a consumer cannot be refused a loan based on these characteristics nor be charged more for a loan or offered less favorable terms based on such characteristics.

Are you considering a second home or relocating to the United States?