Mortgage Basics FAQ

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Where should I shop for home loans or mortgages?

With all the choices out there, shopping for a mortgage can seem like an overwhelming task. There's good news, however: Despite the many choices of where to get loans (banks, credit unions, savings and loans, insurance companies, and mortgage bankers) their offerings are pretty well standardized, in order to comply with government rules. (The Federal National Mortgage Association or "Fannie Mae," as well as other quasi-governmental corporations, set these rules as a condition for buying loans off the lenders.) What's more, some of the creative mortgage variations that were available before the real estate bubble burst have gone the way of the dodo bird.

Start by deciding what type of mortgage you're interested in. The main choices are between a fixed rate and adjustable rate mortgage, though some hybrids of the two are still available. Once you've narrowed your sights -- for example, to a 30-year fixed term mortgage for $300,000 -- you'll be ready to compare apples to apples.

At that point, you can either start looking at mortgage rates yourself or go straight to a loan broker. Mortgage rates and fees are usually published in the real estate sections of metropolitan newspapers and on mortgage websites. (See Nolo's article Where to Shop for a Mortgage.) Realize, however, that the published rates assume that you've got stellar credit and a good income -- anything less and you'll pay more to borrow money.

It's wise to do some advance research even if you decide to work with a loan broker, so that you'll have a sense of the market. Some loan brokers charge the consumer directly, others collect a fee from the lender (though this ultimately adds a little to what you pay for your mortgage).

Be sure to check out government-subsidized mortgages, which offer both no down payment and low down payment plans. (See the question What kinds of government loans are available to homebuyers?, below.) Also, ask banks and other private lenders about any first-time buyer programs that offer low down payment plans and flexible qualifying guidelines to low- and moderate-income buyers with good credit.

Finally, don't forget private sources of mortgage money -- parents, other relatives, friends, or even the seller of the house you want to buy. Borrowing money privately is usually the most cost-efficient mortgage of all. And its popularity has increased as the credit market has tightened.

For information on how much money you can expect from a mortgage, see Nolo's article Qualifying for a Mortgage.

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