Shopping For A Mortgage

If you live in a larger urban area, your local weekend newspaper probably has a Home Section.  Somewhere in that Home Section there is most likely a description of home mortgage loans charted out for you.  The chart will illustrate various loans available from area lenders.  Both fixed rate and ARMs will be illustrated.  Many of these charts will get into a breakdown of the variable costs such as the interest rates relative to points charged at the inception of the mortgage.  Recall from our discussion in the Tax Planning section of the book on page 18 that the more points you pay at the inception of the loan, the more you can buy down the interest rate charged over the entire term of the mortgage.  Ideally, the illustrated ARMs will show the initial rate of interest and what that rate of interest would be if it were "fully indexed" after any teaser rate drops off.  Here is a link to a representative example using a solid lender, Dollar Bank:

            http://www.dollarbankmortgage.com (click on current rates)

At this point you will have a rough idea of the terms and conditions of mortgages available from area lenders.  You should carve out a few hours and call the mortgage loan departments of each and every Bank in your area.  Specifically ask the loan officer about all of the things we have reviewed.  In order to compare apples and apples with different lenders, ask your questions based on a hypothetical loan of the same amount.  At that point you will be able to ask the loan officers at the various mortgage lending institutions what the loan origination fees and other closing costs would be on, say, a $100,000 mortgage.  If you are inquiring about ARMs, make sure you have a firm handle on what index is being used, if there is an initial teaser rate, and what the rate would adjust to (based on current information) if the loan jumped to the fully-indexed rate (like in the Example on page 58).

In going through this exercise you will be shocked at the variation in costs from lender to lender.  For example, I remember that when I went shopping in 1989 for the mortgage I just described to you in the prior Example, the ARM mortgage lender I ultimately went with-compared to the one I almost went with-saved me about $150 per month.  In 1989 dollars that differential was enough to finance the purchase of an automobile.  Comparable savings are available today.  You merely have to keep everything we have talked about in mind and do your shopping.

Another fabulous resource available to us is, of course, the Web.  I have provided you with a great link, which will allow you to scan the entire country for the best mortgage lenders (go to my Web site at http://www.personal.kent.edu/altieri-online.com, click on Home Ownership and then Mortgage Tools).  Don't presume that these Web-accessible mortgage lenders will necessarily provide you with the best deal as compared to your local Bank.  As with all things, however, the more competition there is, generally the better off we are as consumers and the Web certainly opens the competitive field.  Still do the same rigorous shopping and analysis that we just talked about if you are mortgage shopping on the Web.  All of the Web-based mortgage vendors will have 800 numbers where you can call and talk to a human being with regard to these questions.

NOTE:  When dealing with a mortgage lender, stay with the established and legitimate vendors, such as the ones I have linked you to above.  Both on the Web and in your local area, you will want to deal with mortgage lenders not mortgage brokers.  The first category are actually lending institutions that are legitimate and well capitalized whereas mortgage brokers may be more slipshod operations and/or involve unnecessary middlemen skimming a nice profit.