How should I shop for a mortgage?

January 22, 2012 9:23 AM

How should I go about shopping for a mortgage?

I am just getting started on shopping for a mortgage. I have the down payment saved up, and I know roughly what kind of mortgage I would like. My question is that shopping for mortgages seems to be a bit of a catch 22.

From what I understand, if I go around to all the different banks and brokers trying to get the best rate, having multiple inquiries into my credit will then lower my score and I will end up with a worse mortgage. But if I don't shop around, how do I know that I will be getting the best rate?

Everything I read about online seems to say that mortgage brokers are the answer to this, but most of the sites in question seem to be from mortgage brokers themselves, so it's hardly impartial. And it seems that since the broker needs to get his cut, that introduces more cost that could result in paying a higher rate than just going to the bank.

So how do people do this so that they get the best rates possible without shooting themselves in the foot?

If it matters, I will be buying in Ontario.

posted by sah to Work & Money (5 answers total)

multiple inquiries into my credit will then lower my score and I will end up with a worse mortgage

This is a non-issue, at least in the US. Briefly, the credit scoring agencies ignore multiple credit inquiries when they pile up right before you take out a loan. Your credit score (at least mine did) will take a hit when you actually commit to the loan. Not a big deal.

Shop around widely, and pay particular attention to local operations, be they banks or brokers.
posted by fatllama at 10:17 AM on January 22, 2012

There is much more to mortgages than getting the best rate. It's a contract and there are different financial consequences depending on the mortgage if you need to break that contract. Much bigger consequences than the 60 days' notice for ending a rental agreement. A mortgage broker can help you understand the fine details - a good one anyway. A bank representative will hope you don't ask. For example, did you know all TD and ING Direct mortgages are now collateral mortgages? Did you know Scotiabank will sign you up for one of these unless you tell them not to? For some people, collateral mortgages might be preferable.

I am *not* a mortgage broker.
posted by waterandrock at 10:31 AM on January 22, 2012

A mortgage broker will often be able to get you the best rate, but not always. I got an amazing rate through RBC, which was lower than what the mortgage broker I was working with would be able to get me. When I was looking into getting a mortgage, most banks were able to give me a pretty accurate estimate without running a credit check. You outline your income, your debt, etc, and they can give you an idea of what kind of rate they can offer you and how much of a mortgage you qualify for. Ask if there are any special deals available. I was able to get a lower rate by being able to close within 75 days. Once you have an idea of what places you are seriously considering, then you can go further along with the process wehre they will actually have to run your credit. But it shouldn't be nescessary for your initial meetings.
posted by Nightman at 11:23 AM on January 22, 2012 [1 favorite]

I love my mortgage broker. He gets the mortgages at wholesale prices and sells them at retail prices, which is where he gets his cut. Since I'd be getting mortgages at retail prices anyway, I don't lose out and I win because I have someone on my side doing paperwork and talking with lenders. This makes it very easy to switch lenders if someone else offers a better deal because I don't have to do anything. He has my paperwork and all the forms and he can handle it (and he does).

IMHO, getting a mortgage broker is like getting a realtor - there isn't any need to get more than one. They all have access to the same stuff and you should get one that you like, who answers your questions, and with whom you feel comfortable. I picked mine because he answered my questions and he was very specific and clear about all the costs and the whole process. Did I mention that he answered a lot of my stupid questions? Yeah, he did that.

(My realtor was sufficiently impressed by him that she said she would recommend him to future clients)
posted by It's Never Lurgi at 11:46 AM on January 22, 2012

My credit union does seminars on getting a mortgage. They were very helpful when I got a mortgage, and they gave me a good rate, and kept the servicing, so I dealt with them, not with a mortgage holder in some other state. When I had a mortgage holder in some other state, they were horrid.
posted by theora55 at 5:39 PM on January 22, 2012 [1 favorite]