A little competition between potential mortgage lenders can help to get you the best deal. Going into the process, it’s good to know the prevailing rates for the type of loan you are looking for. I get that information from the “today’s feature rates” section at Capitol Federal. Those rates may not be what you’ll get depending on your credit rating and location, but give you a ballpark estimate of what you can expect. If lenders come back radically different than what you see there, that indicates that something is wrong. It could be you (bad credit,etc) or them.
The next step is to apply with multiple lenders. You want to balance the work of applying with the benefit of having multiple offers. I usually get two quotes, but more may be even better. Having multiple quotes allows you to bargain back and forth with each company. I’ve found it useful to deal with a specific person (preferably a manager) at the lenders rather than with a generic customer service rep who may not be able to make a deal happen. Being upfront and honest with both parties makes for the best negotiations. As they compete for your business, shaving a little off the interest rate to get slightly below the other offer is a cycle that may repeat itself many times and result in an ultimate offer much lower than what either side may have agreed to originally.
One last thing to remember is that you should consider the total cost of the loan. I ended up going with a lender offering a marginally higher interest rate on my last home purchase because that lender agreed to pay for most of my closing costs. The lower interest rate from the other offer would only have been less expensive if I held my loan for long time. Since I planned to pay off my mortgage before that lower rate would have saved me more than the closing cost discount by the other guy, going with a slightly higher rate was ultimately less expensive.
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