Whether you are in the market to buy a car, a boat or a stereo system, a prudent consumer needs to shop for the best price. This is especially true when shopping for the best mortgage. Financial "experts" tell you to shop for rates, but they don 't tell you how to shop.
   If you are buying a home or refinancing your current home loan, the key is knowing how to shop for the best loan, the best rate and the lowest fees.
   If you simply call a lender and ask for interest rates, he can tell you anything. One lender may quote a "floating" rate (a rate that is good for seven or 10 days), and another may quote you a 45-day lock. Don’t forget this fact — the longer the lock period, the higher the rate.
   Another lender may quote you the rate for two points, and another may quote you the rate for one point. If you call lenders on different days, you could get widely different quotes because rates don’t stay the same every day. In fact, there are times when interest rates change three times per day. Obtaining an "apples to apples" comparison quote between two or three lenders is like hitting a moving target.
   When you call a lender to shop for rates, you have to know at least nine things about your situation. You don’t have to really intend to lock in the rate, but you have to give them all the same parameters so that you get meaningful quotes. You also have to get your quotes on the same day. You need to have the answers to these questions ready, because a good loan officer will ask them:
   
• How long do you want to lock the rate for? Again, the longer the lock period, the higher the rate will be.
   
• How many points do you want to pay the lender to "buy down" the interest rate? The more points you pay, the lower the rate will be.
   
• Do you want an optional prepayment penalty that obligates you to keep the loan for at least three years? Loans without prepayment penalties contain a slightly higher rate.
   
• What is your average, or "middle," credit score? The higher the credit score, the lower the interest rate.

• Do you have income that is verified with W-2 forms or tax returns? Proving income can help you obtain a lower rate than if you only state the income on the application without proving it.

• Do you have verified assets and banking statements proving that money is in the bank? Postclosing asset verification can help you obtain a better rate.
   
• What type of loan do you want? A 30-year fixed rate? A 15-year fixed rate? Let the lender know what type of loan you think fits your needs. Some lenders quote you a 30-year loan and forget to tell you that the payment is based on 30 years but the rate is fixed for only three years. Don’t find this out when you are sitting at the escrow closing.
   
• What is your loan amount compared with the appraised value of the home? The higher your down payment, the lower the rate you usually get.
   
• What is your monthly debt outlay? This is important because lenders need the total of your housing payments and monthly credit obligations to be a certain percentage of your gross monthly income. If your "debt ratio" is higher than 50 percent of your income, you might have a problem getting a home loan at all.
   Other things to consider
   
• Don’t trust ads in the newspaper, on radio, on a freeway billboard or on television. Ads are generally placed at least a day (and sometime a week) in advance. Since rates change every day, these quotes aren’t reliable.
   
• Be straight. Tell the lenders you’re calling to get a realistic rate quote. Tell them you are calling their competitors. When you ask for a rate quote for a specific lock-in period paying a specific amount of points, ask them the other questions contained in this article. Tell them you want a reliable quote. Let the loan officer know you’re shopping around. You want the best deal.
   
• Be ready for at least one loan officer to fudge a little on the rate because he knows he doesn’t have a shot at your loan if someone else lies to you. If one of the quotes is much lower than the other quotes, chances are the loan officer is speaking with "forked tongue." Beware and proceed with caution. If it’s too good to be true, it’s probably not true.
   
• Ask questions about the loan officer and the company — who are they, how long have they been in the business, etc. This will give you a "feel" if you are dealing with a person and/or a company with a solid foundation. This can provide a good tie-breaker in the event that two quotes come in the same.
   
• A good way to shop for a mortgage is to get a referral (from a Realtor or a friend) and then shop other lenders. Do it properly — with integrity — and tell the lenders how much you are willing to pay in points and how long you want to lock in the rate. Give them the "nine information bullets" mentioned previously. Make all your calls on the same day. Tell the lender, "Based on the information that I’m providing you right now, what is the best you can do?" This will help you get an "apples to apples" quote. Get the best quote under those conditions, and then call the lender who was referred to you.
   Tell him what you found out and he will tell you if it is real or not — and whether he will match it. Then, choose your lender.
   Obtaining a good mortgage depends on the questions you ask. Keep this list as a handy reference tool and chances are your mortgage shopping will be easier. It’s not rocket science — just be straight with the lenders and ask right questions. Tell them to give you the facts and "get to the bottom line." If you take control, getting a good loan will be easier than you think.