4 tips for home mortgage shoppers

Homebuyers and homeowners who want to refinance should shop around before they choose a mortgage. This will help make sure they find the right mortgage for their needs.

Here are four tips:

• Get educated. Borrowers should educate themselves about the basics before they shop for a mortgage. At a minimum, borrowers should know the standard loan term is usually 15 or 30 years (although other term options are available) and the mortgage rate may be fixed or variable. Borrowers shopping for a mortgage with a variable rate should understand how the rate and payment can change.
• Shop around. Different lenders offer different mortgage products, terms and interest rates, and charge different fees. So, shop around, compare loan offers and ask questions. It's tempting to pick the loan with the lowest mortgage rate, but borrowers should consider closing costs and points as well.
• Consider FHA. Many borrowers choose a mortgage insured by the Federal Housing Administration. FHA loans allow for a smaller down payment and have less restrictive qualifying requirements when compared to other mortgages. FHA-insured mortgages almost always require mortgage insurance, which protects the lender if the borrower defaults on the home loan. That's an added cost to the borrower to get the benefits of this type of mortgage.
• Lock the rate. Mortgage rates can and do fluctuate. Borrowers who find a low rate on a loan they like should consider getting a rate lock, which reserves that interest rate for a specific number of days. A rate lock can protect the borrower from a spike in the interest rate that would increase the monthly mortgage payment. Once the rate is locked, the borrower should try to make sure the loan will close before the lock period ends.

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