Mortgage Shopping 101
Make Accurate Comparisons and Good Decisions
Being a good consumer means comparing prices and doing your homework. Shopping for a home loan is no different. Here are some important things to consider to ensure you are making accurate comparisons and good decisions:
When shopping for a home loan, make sure you are making an apples-to-apples comparison by using same-day similar rates for identical types of mortgages. (For example, if you are shopping mortgage rates and have a quote for a 30-year fixed at 5.25%, only compare it to other same-day 30-year fixed quotes at 5.25%.) You will find that mortgage rates and closing costs, nearly every hour, can change significantly in this volatile market.
To ensure the quotes are reliable, ask the lender(s) if they are willing to guarantee (lock) the terms and rates for the time necessary to close your loan. This is a wise approach to get reliable rate and price quotes.
It is crucial to compare the total of “Your Adjusted Origination Charges” listed on page two of your Good Faith Estimate for each mortgage for which you are applying. The total of all lender fees is the price of the mortgage. The lender with the lowest total cost has the best mortgage rate. Choose a lender that guarantees their closing costs before initiating your transaction. It is important to note that title, escrow, taxes and insurance costs are the same, regardless of the lender. The only fees the lender has the control of are the lender’s closing cost.
Annual Percentage Rate (APR) is a number that is designed to represent the total cost of the loan expressed in terms of an interest rate. But it can also be misleading by failing to include some loan costs - so it is not ideal to use in a comparison. To get the most accurate view, compare current mortgage rates plus the total of all closing costs.
That being said, the best mortgage rate may not always be the best loan. There are very important considerations beyond rates and fees when shopping for a mortgage. Customer service, lender experience, and a company’s track record all contribute to your satisfaction in obtaining your loan. You want to work with a lender who knows what they are doing and can deliver on their promises. Always look for a company willing to put their promises in writing. Remember that price is what you pay, but value is what you get.
