Money Monday: Shop, Compare and Negotiate a Mortgage Lender

Choosing the right loan should be based on more than just the lowest rate. 

Posted: 04/09/2012 07:00 AM EDT

In a “buyer’s market,” sometimes it may make more sense to pay a mortgage than to pay rent. If you choose to go that route, finding a mortgage lender can be a difficult task.


Selecting a mortgage lender should be based more on just the lowest rate. When looking for the right lender, speak with multiple lenders and ask for information about the loan amount, loan term and type of loan so you can compare information.


"You want to sit down with two or three lenders to make sure you find one who's a good fit, the right match for you as a borrower rather than a product pusher," Michael Jablonski, executive vice president and retail production manager for BB&T Home Mortgage, tells Bankrate.com. "Mortgage lending should be a collaborative process."


The U.S. Department of Housing and Urban Development suggests getting the following information from each lender and broker you consider:


— Ask each lender and broker for a list of its current mortgage interest rates and whether the rates quoted are the lowest for that day or week.


— Ask whether the rate is fixed or adjustable. Keep in mind that when interest rates for adjustable-rate loans go up, generally so does the monthly payment.


— If the rate quoted is for an adjustable-rate loan, ask how your rate and loan payment will vary, including whether your loan payment will be reduced when rates go down.


— Ask about the loan’s annual percentage rate (APR). The APR takes into account not only the interest rate but also points, broker fees and certain other credit charges you may be required to pay, expressed as a yearly rate.


— Ask what each fee includes. Several items may be lumped into one fee.


— Ask about the lender’s requirements for a down payment, including what you need to do to verify that funds for your down payment are available.


— Ask your lender about special programs it may offer.


When buying a home, remember to shop around to compare costs and terms, and to negotiate for the best deal. Your local newspaper and the Internet are good places to start shopping for a loan. LendingTree.com, for example, compares loan offers in minutes for free. You can usually find information both on interest rates and on points for several lenders.  


If this is your first time buying, you could also be in luck. States across the nation offer grants and free or low-cost counseling services to help you buy your first home. To see if you qualify under your state’s rules, visit here. 


Securing a mortgage loan is a process that shouldn’t be taken lightly. For many people, paying a loan on a house is a commitment that can last anywhere from a few years to 30. Make sure you choose the lender and loan that is most suitable for your long-term plans for homeownership and overall financial goals.


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(Photo: Minneapolis Star Tribune/MCT/Landov)

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