Finding a mortgage

If you've never looked for a mortgage, you may be a bit intimidated by the process. And there's a good reason: You're about to make one of the biggest and most important financial decisions of your life. But it's actually easier to master than you might think.

Many financial companies, including banks, savings and loans, credit unions and mortgage lenders, offer mortgages, and because they're competing with each other for your business, it's smart to shop around for the best deal. It's often a good idea to start with your current financial institution, since you might be offered a break as an existing customer — often a slightly lower APR, or annual percentage rate. Next, you should consider what's available through other banks and credit unions, mortgage or finance companies, brokerage firms and online mortgage companies.

Preapproval

In the past, homebuyers first chose the house they wanted and then applied for a mortgage. But it's now possible to be preapproved for a loan. This means you submit an application and go through the lender's qualifying process first — before you even choose a home. If you're approved, the lender guarantees you can borrow up to a specific amount. This allows you to enter the home-buying market knowing exactly how much you have to spend.

Another advantage of being preapproved for a mortgage is that sellers may be more likely to accept your bid for their home if you can guarantee you have a mortgage. That's because sales contracts are often contingent on the buyer's ability to borrow and can fall through if a mortgage application isn't approved.

There is one caution: There's usually a fee for preapproval, as there is when you apply for any mortgage. So you'll want to ask about fees and take this step only when you're really ready to buy. Or you can ask about prequalification. In that case, a lender will give you a general sense of how much you're likely to be able to borrow, but does not guarantee you'll be approved.