Home Loans and Mortgages - Shopping for Best Deal Can Save

American consumers are funny. We shop at Wal-Mart because their prices are low, and we’ll drive miles and miles to save a few cents on a gallon of gas. And yet when it comes to buying a home, we often just go with the path of least resistance when it comes to obtaining a loan. We’ll go to our bank, or our credit union just because they’re handy or because “we always do business there.” A loan is like anything else we purchase - it’s a commodity, and it’s one with a price that is often variable depending upon where we buy it. In short, it pays to shop around.

Loans are available from a variety of sources - you can get one from a bank, a savings and loan or a mortgage company. You can find one through a broker, or go directly to an employee of a lending institution. No matter where you go to get your loan, be aware that the price you pay will vary - sometimes a lot. Interest rates for home loans can vary daily, and the rates that one institution offers may vary quite a bit from those offered by someone down the street. By all means, shop around. But the interest rate isn’t all you should worry about. 

Here are a few other things that are worth considering when shopping for a home loan:

• The points - A “point” is a fee that amounts to one percent of the loan amount. Buying a $200,000 house? Then a point is $2000. Points are often added to loans for a number of reasons. You might pay a point to lower the interest rate, or a point might be added in the form of an “origination fee” as added profit for the lender. When talking to a lender, ask about the points, and ask about additional fees that will be added to the loan. Don’t forget to ask about prepayment penalties. Many lending institutions now add penalties to the loan contract for paying the loan off early. This could cost you if you decide to refinance in the short term.
• Ask how the lender’s agent is being compensated. It might turn out that some fee is being added to your loan or that the interest rate is being adjusted simply to compensate the person that is handling your paperwork. If so, this might be negotiable. 
• Make sure that you talk to a variety of different types of lending institutions. We took our mortgage out through our insurance company. It wouldn’t have even occurred to us to look to them for funding, but they sent us a letter that said they finance homes and their rates turned out to be competitive. Don’t overlook any possible source of funding; it could save you a lot.
• Shopping around may also help you avoid mortgage fraud or predatory lending. It’s rampant, and by comparing deals, you might avoid being ripped off.

Don’t forget that fees, points, and even interest rates can be negotiated. The market for lending money for houses is quite competitive these days, and agents are eager to make sales. Don’t be afraid to ask or let the agent know that you are shopping around. It’s a buyer’s market out there, so be aggressive.