Mortgages: Doing it Over

Save money this time around by comparing lenders, researching fees

By Karin Beuerlein, FrontDoor.com | Published: 11/01/2007

Shop around for the best mortgage deal; things have probably changed since you bought your first home.

The truth is, unless you're a real estate or mortgage professional, or you buy a house or two every month, you probably aren't completely on top of the game just because you've played it before. You know a good faith estimate from a hole in the ground, but you'd benefit from a refresher course so you can turn that experience into real savings of time and money.

Shopping for a mortgage is probably the part you remember most clearly from last time and not because of all the fun you had doing it. Shopping for a lender may be the most exhausting part of buying a new home. So, in the interest of saving time and energy, you may be tempted to go with your old lender and just take whatever terms they offer.

Don't do it. The market changes constantly. Getting the best deal available can save you thousands of dollars in the short term and many tens of thousands over the long haul. So buck up, and let's get started.

• Pre-qualification takes a few minutes over the phone. You probably already know your price range, but a pre-qualification letter lets sellers know you're serious. Call a lender, answer some brief financial questions, and you're good to go.
• Preapproval requires an appointment with a lender and documentation of all your financial statements. If you're buying within the next few months, get this step out of the way first and show a seller proof you qualify to buy her home. (However, don't show the seller anything that indicates you can afford far more than you're offering.)
• Getting pre-qualified or preapproved does not lock you in with a lender. You don't owe a lender anything until you've signed the closing papers (although don't pay upfront costs like appraisal fees until you've settled on one lender because they aren't refundable).

Shop around
The process of applying for a mortgage loan does ding your credit score slightly, but when a lender checks your credit that opens a two-week window during which subsequent credit checks have no adverse effects on your score.

So spend that two weeks comparing as many lenders as possible. Negotiate for the best possible terms; don't be afraid to tell one lender what another is offering to see if he's willing to beat the deal.

NEXT: Apply for a no-closing-costs mortgage >>

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