Home loans can be obtained from many types of lenders, e.g. thrift institutions, banks, mortgage companies, and credit unions. They all have their own advantages and disadvantages so make sure you check out various types of lender rather than just going to the one you are familiar with. Some lenders will quote different prices, so make sure you contact several, because it is always frustrating to pay too much interest on such a big financial commitment. It is often said that people spend more time finding the perfect dress for an important event than they do finding the perfect mortgage; which is put into perspective by the cost of a dress compared to the cost of a home.

To secure the best rates a popular option is to seek a home loan through a mortgage broker. This finance professional will find a lender for you and will almost certainly have access to many potential lenders, which can mean a wider selection of products and rates. You should bear in mind that brokers are not legally obligated to find the best deal for you unless they have signed a contract to act as your agent. It may not be obvious where you stand because some financial institutions operate as both lenders and brokers, so make sure you ask whether a broker is acting as your agent or not. Brokers generally earn a commission and this may be payable by you in the form of lender’s fees or as an add-on to your interest rate, or both. You should ask your broker how they will be paid and be ready to negotiate if you are not happy with the fee.

Home loans are about much more than the simple interest rate and getting the right terms for you can be more important than the headline rate. The most important information to know includes:

What are the available rates and how much have they changed recently?
Is the rate fixed or adjustable?
If it is an adjustable rate mortgage how and when will your rate and loan payment change?
If it is a fixed rate mortgage how long is the term and what is the penalty if you want to get out early?
What is the Annual Percentage Rate (APR), this takes into account the interest rate, broker fees and some other charges and is shown as a yearly rate so you can compare more accurately

The key to getting the right mortgage is to get the right information. Shop around, ask questions and get help from somebody you trust, whether that be a broker or the nice lady at the credit union who understands your needs and finds you a rate and terms that you are happy with.

The Terminology of Mortgages, also known as “What are they talking about?”

Points: Fees paid to the lender or broker for the loan, usually if you pay more points you get a lower interest rate. You can get points shown as a dollar amount so that you know how much you will actually have to pay.

Fees: These may include loan origination fees, underwriting fees, broker fees, and settlement (or closing) costs. Ask for a full list and try to negotiate because many can be reduced. Some fees are paid when you apply e.g. application and appraisal fees, others are paid at closing.

Down Payments: The standard requirement is for you to invest 20% of the home’s purchase price as a down payment, but some lenders will accept a down payment of as little as 5% with PMI. In certain situations you can have a lower down payment provided the loan is backed by the FHA (Federal Housing Administration), VA (Veterans Administration), or Rural Development Services.

Private Mortgage Insurance: PMI is an insurance policy that protects the lender if you fail to pay the loan. It can be a single or monthly premium depending on the lender’s requirements and your situation. Remember this policy is for the benefit of the lender, not you, so the lowest cost to you is the best cost.

Adjustable Rate Mortgage (ARM): The rate changes based on movements in an index rate, they usually offer a lower initial interest rate than fixed-rate loans because you are taking on the risk of rate increases. The loan agreement may set maximum and minimum rates however your loan payments will change with rate changes.

Annual Percentage Rate (APR): The cost of credit expressed as a yearly rate it includes the interest rate, points, broker fees, and certain other credit charges that you have to pay.

Conventional loans: Mortgage loans that do not need to be covered by PMI or guaranteed by a government agency such as the FHA, VA, or the Rural Development Services.

Escrow: The holding of money or documents by a neutral third party before closing on a property.

Fixed-rate loans: Loans where the interest rate and the monthly payments (for principal and interest) stay the same during the life of the loan.

Lock-in: An agreement guaranteeing a specific interest rate on a home loan provided that the loan is closed within a certain period of time.

Points (also called discount points) — One point is equal to 1 percent of the principal amount of a mortgage loan. For example, if a mortgage is $200,000, one point equals $2,000. Lenders frequently

Settlement (or Closing) costs: Fees that are paid when the mortgage close such as title examination, abstract of title, title insurance, survey fees, preparing deeds, attorneys’ fees; recording fees. Under the Real Estate Settlement Procedures Act, you must receive a “good faith” estimate of closing costs within three days of application.