A friend in another state asked me the other day, "I am about to shop for a home loan, could you give me some tips on mistakes I need to avoid?"  Whether you are purchasing or refinancing a home, here are the tips I recommended to her, and to you all as well.

•1.      Picking a lender because they offer the best rate over the phone or in the newspaper

We have all seen it, the ads offering 2.99% on a fixed loan, or something equally outrageous.  First, get all the facts, and get something in writing when you are quoted well below the other lenders you have looked at.  Keep in mind that if a loan officer quotes you a rate, it's the rate for that day only.  Rates fluctuate with the market and other financial factors, and until you lock in the rate (and get a copy of your lock confirmation in writing), the rate you end up with could be much higher.  Some lenders will get you so far along in the process that you accept the higher rate because you don't want to start over elsewhere.  Likewise, if you get a rate from one lender on Monday and another lender on Tuesday, you cannot truly compare them.  Unless you shop the lenders all on the same day, you are wasting your time.

•2.      Getting a rate quote without giving all the facts

Prices and rates vary depending on the particulars of your loan, including your credit score, down payment amount, loan size, type of property, state, ability to document income, etc.  Unless you provide your information clearly and fully to a lender, you are getting ballpark at best.  Rather than having every lender pull your credit report, pull one of your own (some states like Colorado are free, others charge a small fee), and tell the lender what your credit scores are.  That way when the lender actually locks your loan, he will have given you a more accurate quote, and you won't be surprised. 

•3.      Fudging the truth on mortgage documents

This should go without saying, but you would be surprised at how many people lose their scruples when it comes to getting home financing.  Fraud is the buzzword in the lending industry today, and most companies have multiple ways to ferret out the lies from the truths.  Lenders can seek all kinds of remedies against borrowers who commit fraud, including large fines and jail time.  This goes for brokers as well; I have seen lenders make brokers buy the loans back in their entirety for committing fraud just to get the loan closed.  It's not worth it.

While there are many mistakes you can make in shopping for a home loan, none are fatal.  Get your lender to give you the facts, in writing, don't be afraid to ask questions even if it means calling 10 times a day.  If your lender is as good as they portray themselves to be, they will consider each call an opportunity to educate you on YOUR home loan and earn your trust and respect, and hopefully your business for life.