Mortgage shopping can be terrifying

Mortgage shopping is often confusing and complicated; do some research

Buying a house is, by design, a complicated and expensive process. Most people don’t do it that often; some only do it once in a lifetime. That being the case, the public at large is often relatively uninformed about the buying process, the terminology, and the myriad fees, points, taxes and who-knows-what that gets attached to the loan documents at closing.

It’s a complicated process, and lenders like it that way. Why? Because it makes it easier to hide fees, points and who-knows-what in the loan documents! Junk fees added to closing costs are a huge source of revenue for mortgage lenders; making the process more simple would only make people more aware of how easy it is to hide the fees.

The smart home buyer will take some time to become familiar with the terms, fees, and process associated with buying a home and will take additional time to compare loans from a number of lenders before committing to making a purchase. But how do you compare when every offer seems to have different terms, rates and fees?

The first thing to do is talk to some lenders about different types of mortgages, particularly if you aren’t sure what you would like. Most lenders offer a variety of fixed rate and adjustable rate loans with varying interest rates for each. Once you decide which sort of loan you would like, you can take notes from there, documenting the fees, terms and interest rates that this particular lender is offering for that particular type of loan. While you are at it, ask the lender for an estimate of closing costs. It won’t be precise, but it should be close.

Next, contact a number of different lenders and tell them that you want that specific type of loan and ask them about their terms, fees and interest rate for the same type of loan. And ask for an estimate of closing costs for each of these lenders, as well. The lending business is a varied one, so you want to make sure that you are comparing apples with apples and oranges with oranges. Be sure to ask each lender about when and how you can “lock in” an interest rate. Rates fluctuate all the time; you want to make sure that you can get a favorable rate and keep it. Most lenders will allow you to “lock” your rate within a few days or weeks of closing; some will allow you to do it even earlier for a fee.

There are a number of Websites devoted to taking the mystery out of shopping for a mortgage. You might consult with Bankrate.com or MyFico.com for examples of sites that offer additional information about the fine workings of the lending industry.

Buying a house is complicated, but it need not be confusing. All you need to do is spend a little bit of time doing some research and talking to people. After that, you should be able to make intelligent comparisons between one lender and another. From that, you should be able to determine who will give you the best loan.