Getting the right mortgage at the right price

With the purchase of a home comes a mortgage. That’s a monthly commitment and a long-term commitment.

So, it’s crucial to be a savvy shopper. You want to be sure you’re getting the best deal possible. And you don’t want to rush into mortgage terms just because you’re eager to start life in your new home.

There are several mistakes to avoid. And with some assistance from realtytimes.com, we’re going to cover them:

First, be cautious with advertised rates. Truthfully, some of those super-low rates you see will be beyond reach. That doesn’t mean you can’t get a very good rate because you can. Rates are fantastic right now.

But you need to pay close attention to the fine details, so you’re not surprised by what you ultimately will have to pay. Be alert to the fact that a change in your debt-to-income ratio from the time you were initially qualified to the closing date could change your rate.

You’ll want to compare lenders, too. The same advice that applies to doctors or REALTORS® applies here. You want the best you can find. Any reputable mortgage broker or loan officer will show you what various banks and credit unions have quoted so you can pick the loan that fits you.

In order to get a realistic rate, you will have to share your financial information. You can shop on your own, too, but make sure you do enough shopping so you don’t overlook a good option.

Next, pay close attention to the terms. Start with this: The true cost of the loan is the annual percentage rate, or APR. Be on the lookout for lingo that means you’re going to pay more money. For example, a loan origination fee is essentially the same thing as a processing fee. And the fee can vary widely from one place to another.

Even what a lender charges for pulling your credit can differ from one source to another. And just like you negotiated the price on your house, these fees are sometimes negotiable too.

Building equity, by the way, trumps percentage rate. Make an extra payment a year, if at all possible. If rates decline more in the future, you can always refinance. But that will re-start the amortization process anew.

Also, make sure you get the right type of loan. We all know what happened several years ago – bad loans were given out in bulk. Current market conditions heavily favor fixed rates. The advantage here is you know your rate and can budget accordingly. Adjustable rates are just that, subject to change.

The rule of thumb is that if you plan to stay in your home five years or more, get a fixed rate. If you plan to sell before then, a fixed rate might not be the best option because it usually takes borrowers five years just to earn back original closing costs in equity.

And when you do think you know the right lender, get a quote right then. Waiting means leaving the rate open to change yet again.