With the right preparation, mortgage shopping doesn't have to be complicated.

4 ways to effectively shop for a mortgage

By: Abby Hayes, February 10, 2016

With the average house costing in excess of $220,000, buying a home is arguably one of the biggest financial expenses a person can make. Substantial though it may be, most consumers view it as a smart investment, according to a recent poll.

This is helped by the fact that mortgage estimates are as low as they've ever been before. In the 1970s and 1980s, short-term interest rates were often higher than 10 percent, requiring borrowers to spend a lot of money on top of the principal. Today, prime interest rates are below 4 percent. They've been that way since 2016 began and through most of 2015, according to lending giant Freddie Mac's Primary Mortgage Market Survey. This has led to more people pursuing refinance rates.

However, there are several factors that go into the mortgage rate process. Depending on your financial situation and the terms of the lender, interest rates can run the gamut. If you plan on buying a house, but aren't sure about how the mortgage process works, here are four helpful guidelines to get you started:

1. Determine your credit score

"Your interest rate will largely be influenced by your credit score."

Everyone who has borrowed money has a credit score. This three-digit number serves as a numerical representation of a person's financial reputation, or creditworthiness. The higher the number is, the more creditworthy a borrower is considered to be. Credit agencies like TransUnion, Experian and Equifax each offer one free credit report free of charge. Financial experts say that to get the best rate, your score should ideally be in the high 700s to 800s. 

2. Choose a mortgage that best suits your situation
There are three main types of mortgages: Fixed-rate, adjustable rate and Federal Housing Administration. Fixed rate is the most common kind. They're popular because they guarantees the interest rate stays the same for the duration of the loan. An adjustable-rate, as its name implies, can change, depending on market forces. In other words, what you spend on a mortgage payment in one month might be different the next. It all depends on if the interest rate rises, falls or stays the same. FHA loans are provided by the government and are ideal if you're a first-time homeowner, as the lending standards are looser.

3. Increase your down payment

"You may be able to lower your interest rate with a higher down payment."

In addition to the type of mortgage you get, how much you pay per month largely depends on your down payment. All real estate transactions require a payment upfront, which is a percentage of the home's listed price. If you increase your down payment by paying 20 percent of your home's value instead of 10 or 15 percent, you won't have to spend as much per month. Also, you may be able to lower your interest rate if you spend more upfront.

4. Beware of hidden fees
Just as there's more to a borrower than their credit rating, shopping for a mortgage isn't all about the interest rate. Many people fail to take added fees into consideration. These extra expenses that may may include closing costs, loan origination or broker fees are all part of the process. Before deciding on one lender, ask to see what fees apply on top of the interest rate. This can help you determine if a low-interest loan is worth your while.

For more information on shopping for a mortgage, the National Association of Realtors' website has other pointers.