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

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. 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.

2 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. 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. You can also get ahome loan through a mortgage arrange transactions ratherthan lending money directly; in otherwords, they find a lender for you.

3 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. 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?

4 *Words and terms appearing in bold in thetext are defined in the glossary . Ask about the loan s annualpercentage rate (APR). 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. Every lender or broker shouldbe able to give you an estimate of itsfees. Many of these fees are nego-tiable.

5 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. 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.

6 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. 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.

7 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. Whether quoted to you by a loanofficer or a broker, the price of anyloan may contain the lender or broker write downall the costs associated with the ask if the lender or broker willwaive or reduce one or more of itsfees or agree to a lower rate or fewerpoints. You ll want to make sure thatthe lender or broker is not agreeing tolower one fee while raising another orto lower the rate while raising s no harm in asking lenders orbrokers if they can give better termsthan the original ones they quoted orthan those you have found you are satisfied with the termsyou have negotiated, you may want toobtain a written lock-in from thelender or broker.

8 The lock-in shouldinclude the rate that you have agreedupon, the period the lock-in lasts, andthe number of points to be paid. A feemay be charged for locking in the loanrate. This fee may be refundable atclosing. Lock-ins can protect you fromrate increases while your loan is beingprocessed; if rates fall, however, youcould end up with a less favorablerate. should that happen, try tonegotiate a compromise with thelender or :Shop, Compare,NegotiateWhen buying a home, remember toshop around, to compare costs andterms, and to negotiate for the bestdeal. Your local newspaper and theInternet are good places to startshopping for a loan. You can usuallyfind information both on interest ratesand on points for several rates and points can changedaily, you ll want to check your news-paper often when shopping for a homeloan. But the newspaper does not listthe fees, so be sure to ask the lendersabout Mortgage Shopping Worksheetthat follows may also help you.

9 Take itwith you when you speak to eachlender or broker and write down theinformation you obtain. Don t be afraidto make lenders and brokers competewith each other for your business byletting them know that you are shop-ping for the best Lending IsRequired by LawThe Equal Credit Opportunity Actprohibits lenders from discriminatingagainst credit applicants in any aspectof a credit transaction on the basis ofrace, color, religion, national origin,sex, marital status, age, whether all orpart of the applicant s income comesfrom a public assistance program, orwhether the applicant has in good faithexercised a right under the ConsumerCredit Protection Fair Housing Act prohibits dis-crimination in residential real estatetransactions on the basis of race,color, religion, sex, handicap, familialstatus, or national these laws, a consumer cannotbe refused a loan based on thesecharacteristics nor be charged morefor a loan or offered less favorableterms based on such Problems?

10 Still Shop, Compare,and NegotiateDon t assume that minor credit prob-lems or difficulties stemming fromunique circumstances, such as illnessor temporary loss of income, will limityour loan choices to only your credit report contains negativeinformation that is accurate, but thereare good reasons for trusting you torepay a loan, be sure to explain yoursituation to the lender or broker. If yourcredit problems cannot be explained,you will probably have to pay morethan borrowers who have good credithistories. But don t assume that theonly way to get credit is to pay a highprice. Ask how your past credit historyaffects the price of your loan and whatyou would need to do to get a betterprice. Take the time to shop aroundand negotiate the best deal that you have credit problems ornot, it s a good idea to review yourcredit report for accuracy and com-pleteness before you apply for a order a copy of your credit report,contact:Equifax: (800) 685-1111 TransUnion: (800) 916-8800 Experian: (800) 682-7654 GlossaryAdjustable-rate loans, also known asvariable-rate loans, usually offera lower initial interest rate thanfixed-rate loans.