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Spring mortgage guide

As home buying season nears, here's how to navigate the changing mortgage market.

By Gerri Willis, CNN

NEW YORK (CNNMoney.com) -- Spring time is almost upon us. That means homebuyers are awakening from their winter slumber. We'll tell you what you need to know if you're looking for a mortgage lender this spring.

1. It's a new market

A number of subprime mortgage lenders are in trouble. And to hedge their risk, lending standards have tightened. That means if you have less-than-enviable credit, it's going to be harder to qualify for a mortgage. You may need a higher credit score, says Greg McBride of Bankrate.com.

Mortgage Rates
30 yr fixed 3.98%
15 yr fixed 3.05%
5/1 ARM 3.32%
30 yr refi 4.05%
15 yr refi 3.12%

Find personalized rates:
 

Rates provided by Bankrate.com.

Plus, you may be paying higher rates on your loan because lenders are commanding higher returns to compensate for their losses.

On the other hand, if you have good credit, you'll find that rates are in your favor. Even if you have decent credit, you may find your interest rate and terms to be worse than expected. That's because lenders are being more cautious with all borrowers.

2. Do your homework

Since lending standards are likely to be more strict, you should have a very good sense of what your credit history is like even before you start calling up mortgage lenders.

Some lenders may consider a FICO score below 620 to be more risky, but today, even if you have a slightly better score, you may be considered a risk. Make sure you try to improve your score as much as possible before you apply for a mortgage.

3. Comparison Shop

Don't wait until the last minute to search for mortgage options. You'll want to get offers from at least three lenders so you can compare the terms of your mortgage.

Every lender will provide different plans with different rates and different things tied to those mortgage plans. Start out by checking with major banks and lenders that you know of and of course investigate the recommendations of friends and family.

4. Negotiate Price

It all sounds like bad news, but if you're in the market to buy this spring, the power is on your side. You can negotiate your home price because the housing market is weak. In many markets, sellers are desperate to sell and buyers are few and far between.

Have your real estate agent come up with a price per square foot by evaluating houses that are on the market now in the area you're looking at. Those houses should be similar to the one you're looking to buy in size, number of bedrooms and baths, and other major features. This gives you a rule of thumb you can use to compare homes you're considering and know what price you should be looking for.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.