NEW YORK, May 2, 2002 (AP) - Borrowing money to buy a home can be a nail-biting experience because it's the biggest financial transaction many people make in a lifetime.

Still, a mortgage is a commodity, albeit an expensive one. If you shop around, you should be able to find the best loan at the best rate that you qualify for, experts say.

"When your parents wanted a mortgage, they went and got a fixed-rate, 30-year loan," said Marshall Gayden, senior vice president for real estate sales at Coldwell Banker Mortgage. "Today there are a tremendous number of mortgage options -- even 100 percent financing if you need it."

In fact, he said, the trend is toward "personal pricing."

"We look at the consumer's financial profile -- credit, assets, time on the job -- and put it through an automated underwriting engine," Gayden said. "It spits out a loan price and eligibility for a range of products."

What kind of mortgage should you be shopping for?

The two main forms are fixed-rate mortgages and adjustable-rate mortgages, although there also are a variety of hybrids that combine characteristics of both.

A fixed-rate loan has a set interest rate for a set term, say, 7 percent interest for 30 years. Fixed-rate loans are the most popular right now because interest rates are close to their 35-year lows.

With an adjustable-rate loan, the interest rate can change, sometimes as often as every six months. The initial rate on adjustable mortgages usually is lower than on fixed mortgages, making the loans more affordable. But the borrower risks rate increases in the future.

"If you think you'll move in the next five years, then an adjustable-rate mortgage might make sense," said Eric Tyson, a financial counselor who is co-author of "Mortgages for Dummies."

"You should definitely look more seriously at a fixed-rate loan if you're going to keep your home seven years or more -- or if you can't stand the stress of the possibility your interest rate will be changed," he said.

Tyson also cautions that families should decide themselves how much they can afford to borrow rather than relying on a mortgage lender to set the upper limit.

"They'll look at your financials and quote you the maximum," he said. "What a lot of people forget is that a mortgage lender doesn't care how many kids you have to put through college or how many vacations you take a year. You need to determine how much of your income you want to go to housing and how much to other things."

Shopping for the right mortgage is key.

Keith T. Gumbinger, vice president at HSH Associates, a mortgage information publisher based in Butler, N.J., recommends that families -- especially first-time home buyers -- start their search locally.

"Make a few phone calls to local banks, local savings and loans, your credit union," Gumbinger advised. "Don't hesitate to ask for recommendations from friends. If you're not happy with what you find locally, then expand to big banks, mortgage companies and brokers."

Home buyers should consider asking for prequalification or preapproval for a mortgage even before they start house hunting, Gumbinger said.

Prequalification is fairly easy. A lender asks how much you earn, what your outstanding debt is and how much you've saved for a down payment and then gives you a working estimate of how big a mortgage you'll qualify for.

Preapproval is more formal. "You'll be asked to provide W-2 forms, tax returns, bank statements, credit card statements and the lender will run a thorough credit check," Gumbinger said. "When that's done, you'll be given a specific dollar figure for a mortgage."

At that point, lenders often will set a rate that they'll lock in for up to 90 days.

HSH publishes a series of booklets with detailed information about the mortgage process. Their Homebuyers' Mortgage Kit, which includes a detailed list of mortgages available in your area, can be ordered for $20 at

Mortgages are now widely available on the Internet, and many of the sites have good calculators that can help borrowers compare various loan packages. Sites include Quicken Loans at and E-Loan at

Coldwell Banker provides online mortgage information at Gayden said his company handles most applications via telephone, either relayed from the company's real estate offices or by calling 888 224-6634.

Mortgage shoppers also can find mortgage guides at the federal government's consumer site, Two free publications -- the "HUD Home Buying Guide" and "100 Questions and Answers about Buying a New Home" -- can be obtained by writing the Federal Consumer Information Center, Pueblo, Colo. 81009, or calling 888-878-3256.

Copyright 2002, The Associated Press