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Sarah Leonard

Broker

Q. Should I shop for a home mortgage?



Q. Should I shop for a home mortgage?

A. A mortgage is a product, just like a car, so the price and terms will vary from lender to lender and will be negotiable. Becoming knowledgeable and shopping, comparing, and negotiating can save you thousands of dollars. So it pays to do your homework and shop.

Home loans are available from several types of lenders - thrift institutions, commercial banks, mortgage companies, and credit unions. Different lenders may quote you different prices, so talking to several is a good idea.

You can also get a home loan through a mortgage broker. Brokers arrange transactions rather than lending money directly. They have access to several lenders and can offer a wider selection of loan products and terms.

Brokers are usually paid a fee for their services that may be separate from and in addition to the lender's origination or other fees. Ask each broker you work with how he or she will be compensated so that you can compare the different fees.

Find out about all the costs involved in the loan - and there are many. Knowing just the amount of the monthly payment or the interest rate is not enough. Rates can be fixed or adjustable. Ask about the loan's annual percentage rate (APR). The APR factors in the interest rate, points, broker fees, and certain other credit charges that you may be required to pay.

Then there are points. Points are fees paid to the lender or broker for the loan. Usually the more points you pay, the lower the rate.

There are also many other fees involved, such as loan origination or underwriting fees, broker fees, and settlement (or closing costs). Every lender or broker should be able to give you an estimate of its fees. Many of these fees are negotiable.