How to Compare Mortgage Offers

Comparing mortgage offers can save you thousands of dollars over the life of your loan. This guide helps you understand what to look for when comparing offers, how to analyze different loan terms, and how to make the best decision for your financial situation.

Key Elements to Compare

Interest Rates

Fixed vs. adjustable rates
Rate lock periods
Discount points options
Rate buy-down opportunities

Annual Percentage Rate (APR)

Understanding the difference between interest rate and APR
How fees affect APR
Using APR for true cost comparison
When APR might be misleading

Understanding Closing Costs

Lender Fees

Origination fees
Application fees
Processing fees
Underwriting fees

Third-Party Fees

Appraisal costs
Title insurance
Credit report fees
Survey fees

Loan Terms Comparison

Length of Loan

15-year vs. 30-year terms
Monthly payment differences
Total interest paid comparison
Early payoff options

Loan Features

Prepayment penalties
Rate adjustment terms (for ARMs)
Mortgage insurance requirements
Escrow account requirements

How to Compare Loan Estimates

The Loan Estimate is a standardized form that makes comparison easier:

Compare Page 1 for loan terms and projected payments
Review Page 2 for closing cost details
Check Page 3 for other considerations and comparisons
Look at the five-year cost comparison
Consider the Annual Percentage Rate (APR)

Red Flags to Watch For

Unusually low rates with high fees
Pressure to decide quickly
Hidden prepayment penalties
Unexplained fees
Lack of clear communication

Tips for Getting the Best Offer

Shop multiple lenders within a 14-day window
Request Loan Estimates from each lender
Compare total closing costs
Calculate the break-even point for points and fees
Consider the lender's reputation and service
Negotiate fees and rates

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