Comparing mortgage loans from different lenders can be one of the most difficult parts of mortgage shopping. Factors you’ll need to compare include rates, points, closing costs, and loan features.
How To Compare Mortgage Quotes
First, make sure you’re comparing interest rates from lenders on the same day and if possible, the same time. Rates change daily, if not several times a day. You should also be sure you’re comparing loan programs of the same type. In other words, don’t compare a 30-year fixed mortgage to a 15-year adjustable mortgage.
You’ll also want to compare the loan’s annual percentage rate (APR). The APR number measures the long-term cost of a loan from the date of closing to the date of payoff. It takes into account the loan’s interest rate, points, broker fees, and other charges you may be required to pay. APR is expressed in a yearly percentage.
Points are a fee you pay to the lender up-front at closing. Each point represents one percent of the loan amount. Points can be charged or paid to lower or increase the rate on the loan. Lenders will usually let you choose a variety of rate and point combinations.
Watch the Closing Costs
Closing costs typically consist of title, escrow, and transfer charges, as well as other fees related to the loan. When comparing quotes, you should consider the fees lenders charge to process, approve, and make the mortgage loan since the other fees are typically independent of the lender.
When shopping for the mortgage loan that bests suits your needs, have each lender write down the costs associated with the loan. Once you’re satisfied with the terms you negotiated, you can obtain a written lock-in from the lender. A lock-in includes the rate you agreed upon, the period the lock-in lasts, and the number of points you’ll pay.
Online tools are other useful resources to provide you with free rate quotes and connect you with vital information you’ll need to ultimately select the mortgage that’s best for you. You can also find interest rates and points in your local newspaper.
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