7 Secrets to Getting the Best Deal on a Mortgage

If you're looking for a mortgage you picked a pretty scary time to venture into the housing market. Yes interest rates are at the lowest they've been in a long time and yes the prices of homes are down but the banks have gotten a whole lot pickier about lending money. So what can you do to make sure you get the best deal? Just follow these tips and you'll walk away with the best mortgage that you can qualify for.

1. If Mom and Dad gave you money

If your down payment is coming as a gift from your parents or relatives, keep it in a savings account for at least 2 months before you start shopping for a mortgage. Better yet, get a letter from your parents saying that the money is a gift and not a loan. Otherwise the banks will consider it as another liability you have to pay off.

2. Know how to play the mortgage game

Obviously you want to shop around for your mortgage but just be aware that you need to compare apples with apples. A super low rate will come with higher closing costs and a not so great rate will come with lower closing costs. Calculate all expenses when you compare.

3. Good Faith Estimate

When you have your selection down to 2 or 3 lenders, ask for a good faith estimate (GFE) that covers the total cost of your loan including interest, closing costs and other fees. It may not be an exactly accurate number but it will be close if it's coming from a reputable firm.

4. Lock in your rate?

The lender will lock in your interest rate if you ask him to. If you don't the rate may be higher by the time you actually close and that can cost you a bundle. On the other hand, if you think the mortgage rates forecast are going to result in lower rates, you may want to wait until the last possible moment to execute the deal.

5. Review the costs and fees before closing

Some lenders are notorious for tacking on fees to the mortgage which can nickel and dime you to death. Lenders are required by law to provide you a HUD-1 Settlement Form at least a day before closing. Take that form and your sales contract and review each fee or cost listed and make sure there are no surprises. Once you sign the mortgage you are on the hook for any fees that shouldn't have been included.

6. Review the contract for penalties

Make sure you fully understand the terms of the loan and what penalties that will be assessed if you violate the terms. Pay particular attention if there is a penalty for early payment. If somewhere down the road you want to refinance the mortgage, you could be facing a hefty penalty for prepaying the original off.

7. Increase the pay down on principal without increasing your monthly payment

If there is no prepayment penalty, get in the habit of paying half your mortgage payment every 2 weeks. This will result in you making 26 payments a year or one extra full payment than if you paid monthly and that extra payment will be applied to principal. Over time this can be a substantial savings.

Going through the process of finding the best rates and the best deal on a mortgage can be daunting. The number one thing to remember is if you don't fully understand parts of the mortgage contract, get it explained to your satisfaction. This investment is to large to allow for assumptions.

Mark Polman has considerable experience with the mortgage market and knows just how quickly mortgage rates forecast can change. You need a pro to get the best deal and Mark recommends that you visit Mortgage Canada Rates before you commit to a contract with anyone.