The New Home-Buying Rules

2. Get Preapproved for a Loan

house sold

Shopping for a mortgage is simpler now that many of the "too good to be true" loans have disappeared. Take a look at press-time rates for the three most popular loan types, based on the median mortgage of $170,000).

30-year fixed mortgage for $170,000
Rate: 5.125 percent
Monthly payment: $926
Principal paid in 5 years: $13,616
Best if: You want to lock in a rate and minimize your monthly cost.

15-year fixed mortgage for $170,000
Rate: 4.5 percent
Monthly payment: $1,300
Principal paid in 5 years: $44,517
Best if: You can handle the higher payments so you can own your home outright before your kids start college.

5/1 ARM mortgage for $170,000
Rate: 4 percent (it's set for 5 years, then changes annually based on market rates)
Monthly payment: $812
Principal paid in 5 years: $16,239
Best if: You're confident you'll be selling and moving within 5 years (since costs could rise sharply after that).

Start your search by getting rate quotes at mortgagemarvel.com or hsh.com. Then compare these figures with those you get from a local bank, a large national lender, and a credit union, suggests Keith T. Gumbinger, of HSH Associates Financial Publishers. You can also contact a mortgage broker -- especially if your financial picture is complicated -- but be aware that these middlemen are paid a commission by lenders (who then pass the cost on to you). Once you choose a lender, ask to be preapproved for a mortgage loan. This lets home sellers know how much money you'll be able to borrow. Wait to lock in the rate until you've chosen the house you want.

 

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