Mortgage Shopping

Shopping for a mortgage rate can save you hundreds, even thousands, of dollars. Mortgage rates can vary in more ways than one depending on the lender. Forbes Magazine reported that according to Freddie Mac’s data, “in a single week, borrowers received rates anywhere from 4.2% to 4.8%. Rate shopping is especially important in today’s market, as home prices continue to rise.” Learn how to shop for mortgage rates so you can enter home ownership with confidence in your current and future financial health.

Shopping for mortgage rates isn’t the most fun thing to do, but it’s necessary if you want you get the most bang for your buck. Getting rates from multiple lenders could give you a better interest rate and help you save money in the long term.

First, let’s go back to the basics. What is a mortgage? Defined by Investopedia, a mortgage is a debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments.

Now, what are the different types of mortgages? There are many, but Dough Roller narrowed them down to a list of the most common options, which are:

Fixed Rate Mortgage – this is the most popular option. With this, you have predictable monthly payments spread out over a predetermined amount of time (30 years, 20 years, 15 years).
Adjustable Rate Mortgage (ARM) – with this option, the interest rate can fluctuate.
Balloon Mortgage – this option has a shorter term, averaging around 10 years, and starts with low payments, but at the end of the term the full balance is due immediately.
Interest-Only Mortgage – this mortgage gives borrowers an option to pay a much lower monthly payment for a certain time, after which they’ll start on the principal.
Reverse Mortgage – this gives homeowners access to their home’s equity in a loan that can be withdrawn in a lump sum with set monthly payments.
Combination Mortgage – this is helpful if you need to avoid Private Mortgage Insurance because you can’t put 20% down on a home.
Government-Backed Mortgage – the federal government offers some loans that are backed by government entities to encourage homeownership.
Second Mortgage – also known as a home equity loan, this is when you have a home and have some equity built up in it.

There are a lot of mortgage options out there, so how do you know which one is best for you? It can be a difficult decision that involves more than just who has the lowest interest rate. Other important things to consider are how long you’ll be living in this home and what kind of loan you think you need. Before you talk to lenders, make sure you understand your financial situation and what type of loan you want and can handle. If you understand your needs as a borrower, you’ll be able to better convey to the lender what you’re wanting out of your mortgage.