, or both. You should ask - HUD.gov / U.S. …

1 Shopping aroundfor a home loanor mortgage willhelp you to get the bestfinancing deal. A mort - gage whether it s a homepurchase, a refinancing, ora home equity loan is aproduct, just like a car, sothe price and terms may benegotiable. You ll want tocompare all the costs in-volved in obtaining a mort - gage . Shopping, comparing,and negotiating may saveyou thousands of rate, or both . You should askeach broker you work with how he orshe will be compensated so that youcan compare the different fees. Beprepared to negotiate with the brokersas well as the All ImportantCost InformationBe sure to get information aboutmortgages from several lenders orbrokers.

2 Know how much of a downpayment you can afford, and find outall the costs involved in the just the amount of themonthly payment or the interest rate isnot enough. Ask for information aboutthe same loan amount, loan term, andtype of loan so that you can comparethe information. The following informa-tion is important to get from eachlender and broker:Rates Ask each lender and broker for alist of its current mortgage interestrates and whether the rates beingquoted are the lowest for that dayor week. Ask whether the rate is fixed oradjustable.

3 Keep in mind that wheninterest rates for adjustable-rateloans go up, generally so does themonthly payment. If the rate quoted is for anadjustable-rate loan, ask how yourrate and loan payment will vary,including whether your loan pay-ment will be reduced when rates Informationfrom Several LendersHome loans are available from severaltypes of lenders thrift institutions*,commercial banks, mortgage compa-nies, and credit unions. Differentlenders may quote you differentprices, so you should contact severallenders to make sure you re gettingthe best price.

4 You can also get ahome loan through a mortgage arrange transactions ratherthan lending money directly; in otherwords, they find a lender for you. Abroker s access to several lenders canmean a wider selection of loan prod-ucts and terms from which you canchoose. Brokers will generally contactseveral lenders regarding your appli-cation, but they are not obligated tofind the best deal for you unless theyhave contracted with you to act asyour agent. Consequently, you shouldconsider contacting more than onebroker, just as you should with banksor thrift you are dealing with a lenderor a broker may not always be financial institutions operate asboth lenders and brokers.

5 And mostbrokers advertisements do not use theword broker. Therefore, be sure toask whether a broker is involved. Thisinformation is important becausebrokers are usually paid a fee for theirservices that may be separate fromand in addition to the lender s origina-tion or other fees. A broker s compen-sation may be in the form of points paid at closing or as an add-on to yourShop,Compare,NegotiateLookingfor theBest mortgage ?*Words and terms appearing in bold in thetext are defined in the glossary. Ask about the loan s annualpercentage rate (APR).

6 The APRtakes into account not only theinterest rate but also points, brokerfees, and certain other creditcharges that you may be requiredto pay, expressed as a yearly are fees paid to the lender orbroker for the loan and are often linkedto the interest rate; usually the morepoints you pay, the lower the rate. Check your local newspaper forinformation about rates and pointscurrently being offered. Ask for points to be quoted to youas a dollar amount rather than justas the number of points so thatyou will actually know how muchyou will have to home loan often involves many fees,such as loan origination or under-writing fees, broker fees, and trans-action, settlement, and closingcosts.

7 Every lender or broker shouldbe able to give you an estimate of itsfees. Many of these fees are nego-tiable. Some fees are paid when youapply for a loan (such as applicationand appraisal fees), and others arepaid at closing. In some cases, youcan borrow the money needed to paythese fees, but doing so will increaseyour loan amount and total costs. Nocost loans are sometimes available,but they usually involve higher rates. Ask what each fee items may be lumped intoone fee. Ask for an explanation of any feeyou do not understand.

8 Somecommon fees associated with ahome loan closing are listed on theMortgage Shopping Worksheet inthis Payments andPrivate mortgage InsuranceSome lenders require 20 percent ofthe home s purchase price as a downpayment. However, many lenders nowoffer loans that require less than 20percent down sometimes as little as5 percent on conventional loans. If a20 percent down payment is notmade, lenders usually require thehome buyer to purchase privatemortgage insurance (PMI) to protectthe lender in case the home buyer failsto pay.

9 When government-assistedprograms such as FHA (FederalHousing Administration), VA (VeteransAdministration), or Rural DevelopmentServices are available, the downpayment requirements may be sub-stantially smaller. Ask about the lender srequirements for a down payment,including what you need to do toverify that funds for your downpayment are available. Ask your lender about specialprograms it may PMI is required for your loan, Ask what the total cost of theinsurance will be. Ask how much your monthlypayment will be when including thePMI premium.

10 Ask how long you will be required tocarry the Best DealThat You CanOnce you know what each lender hasto offer, negotiate for the best deal thatyou can. On any given day, lendersand brokers may offer different pricesfor the same loan terms to differentconsumers, even if those consumershave the same loan qualifications. Themost likely reason for this difference inprice is that loan officers and brokersare often allowed to keep some or allof this difference as extra compensa-tion. Generally, the difference betweenthe lowest available price for a loanproduct and any higher price that theborrower agrees to pay is an overages occur, they are builtinto the prices quoted to can occur in both fixed andvariable-rate loans and can be in theform of points, fees, or the interestrate.