Shopping for a Mortgage: What You Need to Know Before You Commit

Buying a home is a big move, and your mortgage plays a huge role in what that move will cost over time. Many buyers focus on finding the right house, but the loan you choose can make just as much of a difference in your monthly budget and long-term finances.

So, before you lock anything in, take the time to shop smart. Comparing lenders and understanding your options could save you thousands over the life of your loan.

Here’s what you need to know before choosing a mortgage.

What Is a Mortgage Rate and Why Does It Matter?

Your mortgage rate is the interest you pay to borrow money. It affects how much you pay each month and how much you'll pay in total over the life of the loan.

Even a small difference in rates can have a big impact. For example, if you borrow $300,000 over 30 years:

• At a 6.5% rate, your monthly payment (excluding taxes and insurance) would be about $1,896.

• At a 5.5% rate, it drops to around $1,703.

That’s nearly $200 a month—or more than $70,000 over 30 years.

Rates change often and depend on things like your credit score, loan type, and down payment. That’s why it’s smart to compare offers and not settle for the first one.

Fixed-Rate vs. Adjustable-Rate: What’s the Difference?

When you choose a mortgage, one of your first decisions is whether to go with a fixed-rate or adjustable-rate loan.

Fixed-rate mortgages keep the same interest rate for the entire term—usually 15 or 30 years. That means your monthly principal and interest payment won’t change, even if market rates go up.

Adjustable-rate mortgages (ARMs) start with a lower rate, but that rate can change after a few years. For example, a 5/1 ARM keeps the rate fixed for the first five years, then adjusts once a year after that.

If you plan to move or refinance before the rate adjusts, an ARM might save you money upfront. But if you stay in the home long-term, a fixed rate might give you more peace of mind.

How Do I Compare Offers from Different Lenders?

It’s not just about the rate. To really compare mortgage offers, ask each lender for a Loan Estimate. This is a standard form that shows your interest rate, monthly payment, and closing costs.

Look at:

• Interest rate – lower is better, but also ask if it includes buying “points” (fees paid to lower your rate)

• Annual Percentage Rate (APR) – this reflects the total cost of the loan, including fees

• Closing costs – these can vary a lot from lender to lender

• Loan terms – confirm whether it’s fixed or adjustable

Compare at least three lenders. That might include a bank, a credit union, and a mortgage broker. Don’t be afraid to ask questions or request clarification—this is a major financial decision.

Why Your Credit Score and Debt-to-Income Ratio Matter

Before you apply, lenders will look at your credit score and debt-to-income (DTI) ratio.

Your credit score shows how well you’ve handled debt in the past. Higher scores (usually above 740) tend to get the best rates. If your score is lower, you might still qualify—but expect higher interest rates or limited loan choices.

Your DTI compares how much you owe each month to how much you earn. Most lenders prefer a DTI below 43%. If you have lots of student loans, credit cards, or car payments, that could affect how much you can borrow.

If you’re unsure where you stand, ask a lender for a pre-approval. It gives you a clear picture of what you can afford and strengthens your offer when you’re ready to buy.

Should I Work with a Bank, Credit Union, or Mortgage Broker?

You have options when it comes to who you borrow from.

Banks and credit unions lend directly. If you already have a relationship with one, it can be worth checking their rates and terms. Credit unions sometimes offer lower fees or more personalized service.

Mortgage brokers don’t lend money themselves. Instead, they shop your loan application to multiple lenders and help you find a good match. Brokers can save you time—but be sure to understand their fees and how they get paid.

No matter who you choose, the key is transparency. Ask for all costs in writing and make sure you understand each line item before moving forward.

Get Informed Before You Choose

A mortgage isn’t just paperwork—it’s a long-term commitment that can affect your budget, stress level, and financial goals.

Take your time, ask questions, and shop around. Talk to a lender, a real estate agent, or both, and make sure you’re picking a loan that fits your life, not just your dream home.

The right mortgage can make a big difference. Get the facts and make it work for you.