How to Shop For The Best Mortgage Deals In Today's Market

Home loan qualifications are based on many factors, the three most important are credit, income and down payment or equity if refinancing.

Since we are talking about shopping for a mortgage. We'll start with credit since this determines the price you will pay (interest rate and fees) for your home mortgage.

If you already know your credit score then you'll have a jump start on the process. There are two different ways to get your credit score. Call a trustworthy mortgage broker or banker and ask to get pre-qualified if you are sure your score is good. If not then you should pay for your consumer credit report with scores.

The reason I suggest doing it this way is because an inquiry from a bank can lower your score a few points each time it is pulled. If you buy your consumer credit score then it won't count against you. If you already have a low score then you may not qualify with too many professional inquiries.

You want to have the least amount of inquiries as possible by banks or other companies offering you credit. You can request your consumer file as much as you want without penalty.

If you are in the market to buy a home or refinance then don't try and finance anything else since this can cause several problems during the process. Remember this is most likely the largest and most important of your financial obligations.

The loan amount you will qualify for is based on your gross monthly income, compared to your total debt, including the new mortgage payment with taxes and insurance. By debt I mean debt on your credit report plus real estate taxes and home insurance. Not your utilities and other monthly expenses.

The correct way to calculate your income is to take your gross amount per pay period and multiply by the number of pay periods in a year. If you are paid weekly take the gross amount before payroll taxes and multiply by 52. If Bi weekly multiply by 26. If paid twice per month then multiply by 24. Finally divide by 12, this is your gross monthly income.

If you have good credit and little debt then your in great shape and will probably qualify for more of a home loan than you'll need or want. 

For the rest of us just add up your minimum credit card payments, car payments, and other loans.

If you will be calling around to shop then you don't really need to figure your new mortgage payment. If shopping online then most banks and brokers have calculators that will figure everything for you with the above information. 

You should contact at least three lenders or brokers by phone. If you are adverse to calling then you can shop online and via contact form or email. It's best to call or meet with the person you will be working with before making a decision. Getting a mortgage is a process and it is not just about the numbers.

You are going to be working with this person for up to a month, you want to make sure it is someone who will give you good personal service. If they like you they are more likely to give you a better deal knowing that you have done your homework and made their job a little easier.

Don't fall for those "lender's competing" sites, those are lead generation sites that lenders pay a hefty fee to be a part of, they don't usually offer the best mortgage deals. Guess who the cost get's passed on to? Referrals form other consumers are best. If you get referrals from a real estate agent make sure you also compare loans with someone you find on your own.

Get a written quote and compare the same term loan between the best three estimates. Don't compare the costs from a 15 year to the costs of a 30 year loan. It's best to decide which term and type of loan you want. Then do a final comparison. This way you can compare apples to apples. When comparing interest rates make sure each quote has the same rate lock in period.

You should get a good faith estimate from each broker. On the last page there is a comparison chart. Use this chart to do a comparison of the origination fees and interest rate. Now all broker fees are lumped together as origination you'll want to concentrate on the adjusted origination charge. This will be on page two at the bottom of the first block.

I usually recommend to go with the lowest origination fees even if the interest rate is slightly higher since the average home loan is usually paid off within the first seven years due to a sale or refinance. If you know you are going to stay with the loan longer it may benefit you to go with the lower interest rate.

A 15 year fixed loan will pay down on principal much faster and the payments are usually only about a third more than a 30 year. ARM's are risky, unless you are a high earner with low debt, or have substantial savings to pay the loan off if rates move up.

In many areas you can also shop the title insurance companies and save a little extra. Sometimes the broker can get you a discount if you ask for it.