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You know how mortgage rates are actually set. You know the different types of mortgage companies. And you've located some good loan officers. Now it's time to apply all that knowledge and find the best mortgage rate for your new condo, town- house, or co-op. It's time to find your rate and select your loan officer.

Hold Your Ground

In your quest for the best rate, the first thing you need to do is hold your ground. Once you've decided on the loan program that is right for you — a 20-year fixed rate, for instance — don't be tempted to change programs during your rate search. If you do, you'll have to start the search process all over again. Why?

Let's say that a mortgage company likes to push its ARM programs. There are certain “scripts” that loan officers can follow to promote a particular loan program — and some can be pretty convincing. Other loan officers take seminars on how to “pitch” a mortgage program so that it looks different or acts differently from other loan programs.

When you make your phone calls, you're shopping for rates. Mortgage companies, however, aren't all that competitive for fixed-rate loans. But they are very competitive with adjustable-rate programs.

“Well, we do have a 20-year loan program, but have you looked at our 7/1 hybrid? How long do you think you'll own that unit? Did you know that people don't keep a mortgage for 20 years? They either refinance or sell long before then, so why pay more for a mortgage program that you won't need when our 7/1 ARM can save you? Blah, blah, blah.”

Sometimes these scripts are dead-on; they make lots of sense. But remember that mortgage companies price their loans from the very same indexes. One mortgage company can't have something that another one doesn't have.

For instance, say that you've done your research and are going out to buy a particular mountain bike. You know the model and the make and all the accessories. You take your information with you to a bicycle shop and ask for their rock bottom price. The salesman tells you $579, delivered and assembled.

You then go to the next bicycle shop and find the exact same mountain bike and ask for their lowest price. The salesman, knowing their prices are a bit higher than their competitors, tells you the price is $619, but then starts asking a few questions:

“How often do you ride and on what type of trails? Will there be lots of rocky trails that might damage your tires? If not, why not look at another model with the same features, but built for the casual mountain biker? It's only $519, and I'll throw in a free tune-up!”

The salesman makes sense. You're not exactly going to climb the Rockies. The second model may be the right one for you. Some buyers will become flustered and say, “I'll take it!” But you stand back and say, “Okay, thanks. Let me check out that same bike at the other bicycle store.” After all, the second model is probably even less expensive at the first store than the second store.

That's how you should react when a mortgage company tries to switch loan programs on you. If in fact you do change your mind from a 20-year fixed-rate loan to a 7/1 hybrid, if s important to call the other lenders for a quote on the same program. Otherwise you could get snookered into the wrong loan.

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