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Finding The Right Lender

Right At Home Daily: Finding It: House-Hunting
By Margaret Crane for Right at Home Daily

You've found the house you want and, fortunately, you can afford it. Now it's time to shop for a loan, akin to car shopping.

How do you find the right lender? Play one lender against the other to get the best rate. The task can be daunting, however, with so many competing lenders and mortgage types from which to choose.

Finding the Right Lender Break the process into manageable parts. Your mortgage should match your personal finances, so be prepared to answer a number of questions, like: How much can you afford? How much can you put down? What are your assets and liabilities? How long do you anticipate living in the home? What is your tax rate? And do you qualify for the mortgage interest deduction? If you can answer these questions, you'll have an easier time finding a good lender and completing the process efficiently.

The media is filled with interest rates. Check the real estate or business section of your local newspaper, on the Internet, in ads, flyers and on the radio and television. You should also talk to friends and neighbors about where they got their mortgage. Call other financial institutions (commercial banks, savings and loans, mortgage companies, and credit unions) for rates and loan program details.

Once you choose a lender, bring your latest tax return, proof of income, debt, savings and investments. If you're self-employed, your lender will want to see your last two years of tax returns plus a year-to-date statement of profit and loss for your company.

To apply for a loan is a detailed process, so make sure you find a reliable mortgage lender who will follow through to the very end; one who will show up at the closing with the check in hand.

Before you borrow consider the following:

1. To find the best lender, you have to shop around. Talk to at least five different lenders before choosing one.

2. While the Internet should offer the cheapest rates, your local bank or mortgage broker may actually have the best deals.

3. Compare loans on an apples-to-apples basis. If you ask one lender for a no-points, no-fee loan and another one about the cost of a loan with two points, it'll be difficult to determine which loan is best for you.

4. Consider hidden costs such as prepayment penalties. If you're going to sell your home or refinance your loan before the penalty period is up, don't take that loan option.

Hammer Have questions about getting a home loan? Visit our forum to find the answers you need.