First time home buyer: How to begin shopping for a home mortgage loan?

Question

I am completely new to the world of mortgages and home loan lending, and I am looking to buy a new house. I am either looking to take out a traditional mortgage or a home equity loan on a house that I own with my parents (which has been mostly paid off now).

I really have no idea how to begin this process. I got some dummy books , but I am still not clear on how to start shopping around for the best loan.

Should I go to my local bank and speak to someone there, or lendingtree.com, or hire a realtor?

(Please do not consider this question subjective, I am just looking for advice and not necessarily the "right" answer).

Answer 1

Since there's not a "right" answer here's some general tips:

• All three of your options are good - just make sure you get multiple quotes. Realtors often use mortgage brokers that they work with often and may not necessarily get you the best deal.
• Get a mortgage on the home you're buying. Mixing a home equity loan on a property that you don't own outright with loans from family members could be a mess. You might also consider selling your share of the house to them to reduce how much you borrow.
• Figure out how much you can afford to put down first, then start looking at how much payment you can afford, which determines how much house you can afford.
• Get a 15-year fixed rate mortgage. Rates are at historic lows, and if you get tempted by an adjustable rate mortgage, when rates go up (and they will) you will be forced into a higher payment or refinance. A 15-year note will have a slightly higher payment but you'll build up equity much faster than a 30-year.
• Don't buy "points". All you're doing is pre-paying interest. You're better of putting more money down and having a lower balance. It also makes it easier to compare quotes.
• Get a disclosure statement with each offer so you can compare fees. Some banks/brokers will charge more fees which can be hard to discern until the end of the process.