How to Get the Best Home Mortgage

As with any financial transaction, when you obtain a mortgage for your home you will work with financial professionals, most of whom are very honest and diligent. Yet even the honest financial officer is probably looking at a considerable commission from your mortgage, and typically has a primary duty to his employer and not to you.

If you have the misfortune of working with somebody who is unethical, you can end up paying a lot more for your mortgage than you need to. Fortunately, there are steps you can take to help make sure that you are getting a good deal.

Before You Apply for a Mortgage

  • Check your credit report. Make sure that it is accurate. Inaccurate entries in your credit history can significantly increase the cost and interest rate associated with your mortgage.

  • Know the terminology. You should also be aware of the types of mortgage you may be offered, and how those options fit with your financial plans. Are you willing to take the risk of having the interest rate go up, such that you are willing to apply for an adjustable rate mortgage (ARM), or do you want the security of having a fixed rate?

  • Know your financial needs. Know how much you need to borrow, and the maximum monthly payment you can afford to pay.

  • Get The Help You Need. If you feel confused, or don't know how to estimate your financial situation and mortgage needs, seek assistance from a loan counseling agency.

When You Apply for a Mortgage

A home mortgage involves a very large amount of money - and you will be well-served if you take your time and do your homework before you commit to a particular lender.

  • Shop around. You can request mortgage quotes from numerous financial institutions in advance of paying any application fees. You will likely find variation not only in the interest rates quoted, but also in the closing costs for the loan.

  • Determine the closing costs. If the lender estimates closing costs, including points and fees, or fails to describe certain costs, ask for additional details - most will provide more information if they believe they may get your business, and those that won't probably don't deserve it.

  • Don't get pressured. If you are pressed to sign a loan application, to borrow more than you need or can afford, to immediately commit to a loan, or are urged that interest rates may immediately skyrocket, be suspicious of the lender. In most case, lenders who apply this type of pressure do not have your best interests at heart.

  • Don't sign anything you don't understand. If you need help from a lawyer or housing counselor, ask for a copy of the contract and have it reviewed. Don't sign a contract which contains blank spaces "to be completed later".

  • Don't make false representations on your mortgage application, even (perhaps especially) if the loan officer tells you that "it's no big deal". Report any lender which urges you to put false information on your loan application to the FTC.

  • Don't buy credit insurance you don't need. If you need or desire credit insurance, consider seeking price quotes from insurance providers other than your lender so you know if your lender.

Protect Yourself At Closing

Before you sign the mortgage contract:

  • Read all of the fine print. Don't let anybody rush you. Make sure that all the information on the loan contract, including any information about you, is correct. If there is anything you don't understand, ask for an explanation.

  • If the terms of the loan offer have suddenly changed, don't be afraid to walk away and find a different lender.

Copyright © 2004 Aaron Larson, All rights reserved. No portion of this article may be reproduced without the express written permission of the copyright holder. If you use a quotation, excerpt or paraphrase of this article, except as otherwise authorized in writing by the author of the article you must cite this article as a source for your work and include a link back to the original article from any online materials that incorporate or are derived from the content of this article.

This article was last reviewed or amended on Apr 6, 2018.