Shopping for a mortgage? Our second opinion can save you thousands.

You have a mortgage commitment in hand. Your lender or broker says it is a great deal. If you can't answer these questions, it can cost you thousands over the life of the loan:

• Are the rate and terms competitive?
• Is your rate locked, when, how, and for how long? Should you lock it?
• What if rates go up or down before you lock? What if your lock expires?
• What are the lender's extension policies?
• Does the mortgage have a prepayment penalty? Recasting? Can it be modified?
• If the rate is adjustable: what index, how often it adjusts, the margin, and the annual, monthly and lifetime caps?
• Are there conditions that could stop you from closing on time?
• Buying a co-op or condo: what could jeopardize your financing?
• What is a "jumbo rate" and how do you avoid it?
• How can you renegotiate, or minimize closing costs?

A fresh pair of eyes can catch one overlooked term or condition before it costs you.

A Loan Estimate is an estimate of the costs of getting a mortgage, normally prepared by the lender or broker and given to you within three days of application. It is an estimate, not a final accounting. Too often closing costs turn out to be thousands higher than the estimate, and borrowers find out at the closing table, when it is too late. Know the reasons for any change before you get there.

One size does not fit all. Your options depend on your credit history, income and assets. If you can't answer these, we can help:

• 30-year, 15-year, 10-year fixed, or one of the many adjustable products?
• Should you trade a prepayment penalty for a lower rate?
• Conforming or non-conforming loan?
• Do you need private mortgage insurance, or is an equity line second mortgage better?
• What is best if you plan to prepay large amounts?
• Full income verification, or a program with less documentation?
• Should you refinance? Should you accept seller financing?
• What are your short and long term plans and your cash flow strategy?

Lenders screen borrowers carefully to reduce risk, which helps keep rates low. Programs with little or no verification exist, but they carry higher rates. The usual steps:

• Fill out an application and sign the required disclosures; collect W-2s, bank statements and similar documents.
• The lender orders an appraisal and credit report (no appraisal for a pre-approval).
• The lender verifies your income, assets and liabilities.
• The loan package goes to an underwriter for approval.

Tip: consider a pre-approval, so credit questions are answered before you find a home.

• Paying on time is not the only thing that counts. Too many recent inquiries or a lot of open debt can lower your score.
• Pay bills on time starting now; current history counts more than old history.
• Keep non-mortgage debt reasonable relative to income.
• Little or no credit can also lower a score. A small loan or a responsibly managed card can help.
• You can get your credit reports from Equifax, Experian and TransUnion. Mortgage lenders pull their own "3 bureau merged" report, so your own copy can't be used for an application.
• Check your reports for errors before applying.

A discount point is a one-time fee paid to a lender, usually to get a lower rate. One point is 1% of the loan amount (on a $100,000 mortgage, one point is $1,000). On a purchase, points can be paid by the buyer or the seller; on a refinance, the borrower pays. To judge if they are worth it, work out the payback period: the cost of the points divided by the monthly savings in principal and interest.