How to shop for a mortgage: A guide for homebuyers in 2025

Are you walking away from thousands in potential savings on your next mortgage? According to a recent survey from LendingTree, a surprising 54% of homebuyers never look beyond their first mortgage offer. Yet the rewards of shopping around for a mortgage are clear: Some 45% of borrowers who take the time to compare offers find a better deal.

We don’t want you to leave money on the table. This guide can help you shop for a mortgage — including tips for negotiating with lenders — to find the best and most cost-effective home loan in 2025.

Understanding the types of mortgage loans

When choosing a mortgage, you’ll make two important decisions: which loan program best fits your needs, and whether a fixed- or adjustable-rate makes more sense for your situation.

Types of mortgage rates

Before exploring specific loan programs, let’s break down the difference between fixed and adjustable rates, as this choice can significantly impact your long-term costs.

💡 How it works: Adjustable rates vs. fixed rates

For a $400,000 loan, choosing a 5/1 ARM at 6.30% instead of a 7% fixed rate could save you $514 monthly during the initial period — $2,476 versus $2,990. However, when the initial period ends in five years, your payment could jump to $2,958 if rates rise to 8.3% — an increase of $482 monthly.

Popular loan programs

Conventional mortgages are among the more popular ways to finance a home purchase, though you can find many different types of loans that might offer lower down payment requirements, higher borrowing limits or more depending on your personal situation.

💡Expert tip: For homeowners ages 62 and older, a reverse mortgage is one option that lets you tap into your home equity while getting rid of monthly payments — but there are risks involved. Learn more in our guide to reverse mortgages, including who this option may or may not be best for.

How to shop for a mortgage: A step-by-step

While many homebuyers stick with the first lender they talk to, this can be a costly oversight. Taking time to shop around and talk to brokers could literally save you thousands over the life of your loan. Here’s how to shop for your next mortgage in six steps.

1. ​​Calculate your budget

In addition to your mortgage payment, you’ll need to budget for property taxes, insurance, maintenance and potential HOA fees. A good rule of thumb is to keep your total housing costs below 28% of your gross monthly income to maintain comfortable breathing room.

Dig deeper: Can I qualify for a mortgage if I’m about to retire?

2. Know your credit score

Your credit score plays a vital role in determining your mortgage rate, and so you’ll want to order your free credit reports from all three major bureaus once a year through the federally authorized AnnualCreditReport.com.

Review each of your reports carefully for any errors, and report any inaccuracies or incomplete information directly to the credit bureau. Even small mistakes could affect your rate, so it’s worth taking the time to get them corrected.

💡 Expert tip: Until your mortgage closing, keep your financial picture stable. Don’t apply for new credit cards or move money between accounts, and continue to pay your bills on time. Changes to your finances can trigger new questions from your lender.

Dig deeper: Does your credit score matter after you retire?

3. Research and call lenders

When mortgage shopping, you’ll encounter four main types of lenders:

• Traditional banks offer in-person service and customer perks, but typically higher rates

• Online lenders have competitive rates and faster, more convenient digital processing

• Credit unions often have special member programs, particularly for retirees

• Mortgage brokers have access to hundreds of lenders for best rates, but usually charge a broker fee

Brian Shahwan, VP Mortgage Banker and Broker at William Raveis Mortgage, offers his perspective:

“When interviewing a mortgage company or broker, ask how many lenders they work with and explore their full range of financing options. Remember that these initial conversations are completely free and won’t trigger a hard credit check.

“While I would say the benefits of using a mortgage broker generally outweigh going directly to a single bank, there can be advantages to working directly with banks. For instance, high-net-worth individuals may receive additional benefits as private clients, and some down-payment assistance programs are only available when going directly through specific banks.”

Overall, Shahwan recommends a balanced approach: consult with both a broker and at least one or two other lenders to ensure you’re seeing the full spectrum of available loan options and getting the most competitive deal.

4. Get multiple quotes and compare them

Contact at least three lenders to request loan estimates. Compare the APR of each loan, and not just the interest rate. The APR represents the amount you’ll pay each year to borrow, including the interest rate as well as fees and costs associated with your loan, making it a more accurate way to compare rates between lenders.

When requesting rate quotes, also ask each lender about float-down options — which allow you to lock your mortgage rate but get a lower interest rate if market rates drop before closing — and any special programs or benefits they offer.

5. Apply for your mortgage

Once you’ve chosen a lender, submit your formal mortgage application and documentation. Your lender will process your information, order an appraisal and begin the underwriting process.

Prepare to provide the following documents:

• Two years of tax returns

• Proof of income, including current pay stubs or pension or Social Security verification letters

• Two months of bank and retirement account statements

• Current mortgage, credit card and loan statements

• Government-issued identification

💡 Expert tip: If you’re planning to tap retirement accounts for your down payment, talk with your financial advisor about the tax implications and timing of withdrawals.

6. Close the deal

Last but not least, review your complete monthly housing costs carefully as you approach closing and get the keys to your home. Home sales that involve mortgages can take place up to eight weeks after your offer is accepted, and you’ll typically gather at the office of your mortgage lender, title company or attorney to finalize your home purchase.

To help you better prepare for closing day, consider scheduling for the morning, which allows time to address any unexpected questions that arise. Plan for two to three hours to complete the paperwork.

Here’s what you’ll want to bring along to your closing:

• A photo ID for each person listed on the mortgage

• A certified cashier’s check for your closing costs, including your down payment, pro-rated property taxes and any prepaid interest

• Proof of homeowners insurance

• A checkbook for any extraneous costs, like homeowners association fees

💡 Expert tip: Have a financial advisor or a real estate lawyer review your documents 24 hours before signing. They can explain complex terms and disclosures and spot potential issues, giving you confidence in your new mortgage.

Dig deeper: Age-smart ways to save on your homeowners insurance premiums

How to compare mortgage offers

Shopping around for loan estimates can save you significant money — an average $1,500 over the life of the loan by comparing just two offers, according to Freddie Mac. The more quotes you compare, the more you stand to save.

While it’s a key factor to compare, you’ll want to weigh more than just the annual percentage rate when deciding on a mortgage lender.

Annual percentage rate (APR)

A 5.8% interest rate might catch your eye, but the APR might be 6.1% after fees and charges are factored in. For context, the national average for a 30-year fixed mortgage APR is currently 7.01%, while the 15-year fixed mortgage APR averages 6.35%, according to a February 2025 Bankrate survey of the nation’s largest mortgage lenders.

However, Shahwan offers a broader perspective: “Depending on where you are in the process, don’t focus 100% of your energy on the best rate, but ask about other factors such as closing costs and free float downs. While rates will fluctuate with the daily market, other terms and benefits will not.”

Dig deeper: How much does a 1% change in mortgage rates actually matter?

Points and rate buy-down options

Points are optional upfront fees you can pay to reduce your interest rate:

• Each point usually costs 1% of your loan amount

• One point can typically reduce your rate by 0.25%

• They’re most beneficial if you plan to stay in your home long enough to benefit from the costs

When considering points, Shahwan advises taking market conditions into account: “In a declining rate environment, many brokers advise against buying points. Instead, consider taking the lowest zero-point rate available and saving the money for a potential future refinance.”

Monthly payment: Principal, interest, taxes and insurance (PITI)

PITI is the total monthly payment on your mortgage, including:

• Principal and interest payments

• Property taxes

• Homeowners insurance

• Mortgage insurance (if required)

• HOA fees (if applicable)

You’ll want to make sure these expenses fit comfortably into your monthly budget, remembering that property taxes, insurance costs and HOA fees can rise — sometimes significantly — over time.

🏡 What is private mortgage insurance?

PMI is insurance that protects your mortgage lender from loss if you default on your loan or aren’t able to repay what you borrow. You’ll typically pay PMI on conventional mortgages when your down payment is less than 20% of your home’s purchase price.

If you put down less, you’ll pay PMI until you’ve built at least 20% equity in your home, after which you can request your lender to remove your PMI responsibility. See our guide to building equity in your home more quickly — and avoiding PMI.

Closing costs and fees

Expect to pay between 2% and 5% of your loan amount for various closing costs, which typically include:

• Origination fees

• Appraisal costs

• Title insurance

• Other lender fees

💡Expert tip: Remember to ask each lender about their float-down options and any special programs or benefits. Getting multiple quotes helps you find the best mortgage for your needs and puts you in a stronger position to negotiate.

Tips for negotiating with lenders

Use competing offers as leverage and remember that everything is negotiable — from rates to fees to loan terms. Your strongest position comes from being well-informed and having multiple options.

You may prefer one bank but get a lower rate from another. In that case, your preferred bank may be willing to match that rate to get your business.

When negotiating with lenders, be polite but firm while taking advantage of these proven strategies:

• Know your financial position. Ready your credit score, down payment and other financials to support the changes or adjustments you’re asking for.

• Present competing offers. Leveraging multiple quotes from other lenders strengthens your position for asking them to match or beat their competitors’ terms.

• Time your rate lock strategically. In today’s volatile market, Shahwan advises against waiting for the perfect rate. Instead, he recommends a two-part strategy:

  • Take advantage of free float-down options, which let you secure a lower rate if markets improve before closing

  • Lock in when you see a favorable dip

• Negotiate beyond the rate. While interest rates are important, lenders are usually open to haggle other costs, including:

  • Origination fees and closing costs

  • Loan application fees

  • Rate lock periods

  • Underwriting and processing fees

  • Appraisal fee waivers

Dig deeper: 6 ways to get the lowest rate on your next mortgage

Other stories in our homebuying series

FAQs: Homebuying, borrowing costs and saving money

Learn more about how mortgages work with these common questions. And take a look at our growing library of personal finance guides that can help you save money, earn money and grow your wealth.

How do I find a good mortgage broker?

Do a Google search and inquire with friends, family and local real estate agents if they know any good mortgage brokers. Additionally, if you’re considering purchasing a condo or co-op, ask your agent which banks have recently completed transactions in that building. They may know about additional benefits or programs specific to that property, such as community lending programs.

Can a cosigner help me get a lower mortgage rate?

Having a cosigner on your mortgage can help you qualify for lower rates and better terms since they are legally responsible for the loan alongside you. Keep in mind that mortgage lenders generally look at the lowest credit score between all applicants when determining the rate. Make sure to carefully weigh the pros and cons of using a cosigner before going down this route.

Should I get prequalified for a mortgage loan?

Prequalification could be a good first step in the mortgage process, providing you with an informal estimate of how much you may be able to borrow. Unlike mortgage preapproval, prequalification provides a quick way to evaluate your financial readiness to purchase a home without the need to complete a lengthy mortgage application or gather personal and financial documentation. Learn more about the difference between these two important homebuying tools in our guide to home loan preapproval and prequalification.

What is the downside to getting an ARM?

The biggest risk with an adjustable-rate mortgage is that you won’t know your future monthly payments once the fixed period expires. If interest rates rise substantially, your payments could increase dramatically, which may strain your budget and make it harder to meet your financial objectives without refinancing your ARM into a fixed-rate mortgage.

Can a lender ask my age as part of the application process?

Yes. While it’s legal to ask your age, they can’t reject your application solely because of how old you are – this would violate fair lending laws. Lenders evaluate factors like your income and credit history, but age alone cannot be used to deny you a mortgage (unless you’re under 18 in most states). Learn more in our guide to mortgage approval in retirement.

What happens to your mortgage after you die?

A mortgage has special considerations compared to other types of debt in estate planning. The way you structure your will and estate plan will affect both what happens to your mortgaged property after death and the ultimate value your heirs receive. Learn more in our guide to mortgages after a death — including steps you can take to avoid complications for your loved ones.

About our writer

Kat Aoki is a seasoned finance writer who’s written thousands of articles to empower people to better understand technology, fintech, banking, lending and investments. Her expertise has been featured on sites like Lifewire and Finder, with bylines at top technology brands in the U.S. and Australia. Kat strives to help consumers and business owners make informed decisions and choose the right financial products for their needs.

Article edited by Kelly Suzan Waggoner