Low Rates Make 'Dream' Cheaper Than Ever

While most people focus on a loan's interest rate, the true cost includes any related fees. When comparing deals, make sure you're comparing all the costs.

Brokers who offer loans without closing costs are usually rolling those fees for appraisals, title search and legal fees into the interest rate they're offering. A 5.25% loan without closing costs might not be as good a choice as a mortgage with a lower rate and modest closing costs. Each lender should give you a "good faith" estimate of all costs.

In today's volatile market, it's probably not wise to buy "points" to reduce your rate. Usually, each point equals 1% of the loan amount, so each point of on a $100,000 loan costs $1,000. While points can be tax deductible, they amount to wasted money if you refinance at a lower rate later.

Interest.com offers calculators that estimate the amount you can afford to borrow and the amount of time you would need to hold the loan to break even with points.

Step 3: Start your search

Radio advertisements are back, promising easy deals and low rates without closing costs. How will you know you're getting a good deal?

Online tools make comparison shopping simple. Some of these sites are run by mortgage companies, which use them to find leads. You might have to give some personal information to get a quote, but don't give your Social Security number until you're ready to lock in.

GuaranteedRate.com, for example, helps users compare deals and contact brokers. If you find a better deal on a fixed-rate loan elsewhere, the company will pay you $500.