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Shopping for a mortgage

Shopping around for a mortgage 

takes time and energy. But it can 

save you thousands of dollars. Make 

it your goal to compare at least three 

loan offers from different lenders. 

Get at least three preapprovals

The Internet and newspapers are a good place 

to start your search. Contact banks, credit unions, 

mortgage lenders, and mortgage brokers. 

Ask at least three different lenders for “preapproval.” 

This means that the lender looks at your finances and 

estimates how much you can borrow and what interest 

you’ll likely pay. Preapproval lets you try out each lender 

to see what kind of loans and prices it offers. When you 

get all three preapprovals within 45 days, there should 

be no major impact on your credit score.

You’ll come back to these lenders when you’ve 

made some decisions, and ask them for loan offers.

Shop for loan terms, interest rate 

structures, and programs

Loan term: Longer or shorter

In general, the longer it takes to repay the loan, the 

lower your payment. But you’ll pay more in total over 

the life of the loan, because you’ll pay more interest.

§ 30-year: Most homebuyers choose a 30-year 

loan because payments can be low.

§ 15-year: Payments are typically higher than for 

30-year loans, but your loan is paid off in 15 years. 

Lenders may offer other lengths, like 20 years, 7 

years, or even longer than 30 years.

Loan interest rate structure: Fixed rate or 

adjustable rate

Fixed-rate loans are common. Your initial payment 

may be lower with an adjustable-rate loan, but 

if interest rates rise you might face sharply 

increased payments. 

§ Fixed-rate mortgage: Your interest rate and 

monthly payment will stay the same for the life of 

your loan.

§ Adjustable-rate mortgage (ARM): Your interest 

rate typically is fixed for the first few years of the 

loan. Once the fixed period expires, the rate 

adjusts at regular intervals based on the market, 

and this means your payment amount changes. 

Details are included in the quote you receive 

from the lender.
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Loan program: Conventional, FHA, or 

special program

There are many loan programs, and some are set 

up to help make mortgages available to people in 

certain circumstances or groups.

§ Making a down payment of 5% or more? Ask 

about a Fannie Mae or Freddie Mac eligible loan, 

often called a “conventional” loan.

§ Making only a small down payment? Ask about 

an FHA-insured loan.

§ Servicemember or veteran? Ask about a VAguaranteed loan.

§ Buying a home in a rural area? Ask about a 

USDA-sponsored loan.

§ First-time homebuyer with low or moderate 

income? Ask about loans available through your 

state’s housing finance agency.

Compare loan offers

Now, it’s time to start the official application process. 

Ask your lenders for offers of loans that reflect your 

choices for loan type, program, and term. Then you’ll 

be able to make apples-to-apples comparisons. 

First, compare the basic parts of the loan:

§ What is the term of the loan?

§ What is the interest rate? 

§ What down payment amount is the loan based on?

§ How much is the monthly payment?

§ For adjustable-rate mortgages, are the 

payment adjustments and the interest rate 

capped? Does the interest rate go down if 

market interest rates fall?

Next, compare the rest of the details that can affect 

your cost:

§ When will my payments pay off my principal?

§ Will the payments change over the life of the 

loan? How high can my payment go?

§ Does my payment include property taxes and 

insurance? If not, can I afford to pay those 

separately?

§ What costs and fees will be added to my initial 

payment? To my ongoing payment?

§ Do I need to pay points (upfront fees that reduce 

your interest rate)?

§ What fees and costs are included in the amount 

I’m borrowing (typical for a “no closing cost” loan)?

§ Does the written offer match what I was told 

about the loan?

§ Can I get a better deal on settlement services 

from different service providers?

§ Can I repay the loan early without penalty?

Ask for a better deal

Once you see the offer from several lenders, ask if 

they can do better. There’s no harm in asking, and 

the lender may be able to waive or reduce one or 

more of the fees, or lower the interest rate or points.

Make sure that the lender doesn’t lower one fee 

while raising another, or lower your interest rate but 

raise your points.

For help

Call the CFPB at 1-855-411-CFPB (2372) and 

speak with a representative who can connect 

you to a HUD-approved housing counselor.