Shopping for Mortgage Rates

By Miranda Marquit, guest writer

It has always been a bit interesting to me that many people are willing to shop around for the best deals on their groceries, and even compare credit card offers. Few, however, actually shop around to get the best mortgage rate. Getting a good deal on your groceries (especially through a combination of coupons and sales) can feel good, but the money you save pales in comparison with what you could save if you get the best possible mortgage rate. Here are some things you can do in order to get the lowest mortgage rate:

Get your credit score up to specs. Especially in today’s mortgage market, you need your credit score in good shape. Plan ahead three to six months and work on getting your credit score up a bit by paying bills on time, reducing credit card balances and fixing any mistakes that might be there. (You can get a free credit report each year at AnnualCreditReport.com.)

Know your financial situation. Knowing your monthly income, and having a clear picture of your financial obligations (read: debts) and your credit history can help you when you visit different mortgage lenders. Make sure that you are completely honest. That way, the different offers you get are more likely to be accurate.

Meet with a few mortgage lenders and brokers. Make appointments with three to five mortgage lenders and/or brokers in town. Ask them about different home loan programs, as well as the kind of interest they can offer you. Make sure that you have a list of the questions to ask. You’ll get the best comparison if you have the same information from each.

Try looking online. There are Web sites like Lending Tree that allow you to put in your personal information and get back offers from different Web sites. Get this information, and take it with you when you meet with local mortgage brokers and lenders.

Remember to avoid getting “pre-approved” at this time. Rather, just find out what sort of ballpark offer you can get. Pre-approval requires a credit score check, and after a few them it can harm your credit score (which can affect final approval down the road). Also, don’t be tempted by variable rates and interest only loans. The rates may be lower, but in the long run, when the payments reset, you could run into serious problems – including possible foreclosure if you can’t make the higher payments.

Miranda Marquit writes about mortgage loans for LoanShak and the Banks.com Mortgage Blog. She also edits Creditorweb, a site that allows you to compare credit card offers.