Now, more than ever, it’s a scary time to be a homebuyer. We’ve all heard horror stories of people who have lost their homes due to sub prime mortgages and predatory lenders. Most homebuyers will need to get a mortgage. So, how do you pick the right one? Here’s some advice to help you navigate the mortgage market:

• A fixed rate mortgage means the interest rate is fixed over the life of the loan, say 30 years.
• An adjustable rate mortgage means that the interest rate changes—it’s adjustable. For example, with an adjustable interest rate you can get a 5 year or 10 year rate. This means that the initial interest rate is fixed for the first 5 or 10 years, but after that time period is up, the rate will be changed.
• In this market (Spring 2008), the best choice is definitely a 30 year fixed rate because there is not that much difference between the fixed and adjustable rates.
• The only reason to seriously consider an adjustable rate is if you are fairly certain that you are only going to be in your home for a short time. If you opt for an adjustable rate, make sure you aren’t giving away your house to get the loan.
• During the housing boom a lot of people got really bad adjustable loans with all kinds of caveats—high fees, high rates of interest—which really hurt people. Now many people can’t get out of these loans and they are really in trouble.

Is it difficult to get pre-approved and pre-qualified for a mortgage?

• These days it is not easy to get pre-approved for a mortgage. You have to have a high credit rating—starting in the high-600's/low-700's in order to qualify for a loan.
• But getting pre-approved is one thing; what you really want to be is pre-qualified for your loan. Pre-qualified means that you have done the up-front paperwork and the bank has in fact agreed to the loan before you even go to bid on your house. Having done this makes you look like a very serious buyer and you will be much more attractive to sellers.

• It’s pretty easy to find one. Credit unions offer lower rates of interest to its members.
• Don't overlook local financial institutions in your area; small banks can offer lower interest rates as well.

How trustworthy are mortgage lenders on the Internet?

• Use the web to get information on loans, and to find out who the best people out there are, instead of getting your loan there.
• There are two great web sites you can access: www.bankrate.com and www.hsh.com. These sites will provide you with the rates being offered from institutions in your area—really specific information. From there you can get a sense of who is offering the best rates.

What is the role of a mortgage broker?

• A mortgage broker is really a sales person. They stand between you and the lender.
• You need to make sure you are working with someone who has a good reputation. It’s a good idea to ask friends and family for someone they’ve used or know.
• Mortgage brokers are really best suited for people who have difficultly proving their income—say someone who works for themselves.