Comparing Mortgage Loans Between Lenders

Comparing mortgage loans between different lenders can be a challenging experience. Knowing how to determine which lender is providing the best value for you requires knowing more than just the interest rate. Lenders try to make it easier to understand the total cost of a loan by providing an APR, annualized percentage rate.

An ARP takes into account closing cost, points and the interest rate on the loan. The closer the APR is to the loan rate, the better. This means that the fees - the points and closing costs - are low relative to other mortgage options. Getting your lender to detail what makes up the APR is important and should be expected. Don't forget, it is your money we are talking about and you deserve to know what it is costing you to borrow money for a mortgage loan.

Closing costs can be a catch all for a number of fees, be sure to do a line by line check of all the fees that go into the closing costs. This is often the portion of your total mortgage that lenders can make a lot of money on. Make the effort to understand what the different fees are that are in the closing costs and which ones are fixed or mandatory. There are escrow and title charges, government fees and transfer fees. Credit history reports are often wrapped into the closing costs. A documentation preparation fee can be including. Question everything in the closing costs and point out where fees seem excessively high. You can negotiate your were into saving money if you understand the different fees.

Points are simply the fee related to the loan. Oftentimes, this is about one percent of the total loan value. Most lenders will give you the option to buy down your interest rate by paying more points. A mortgage loan with a one percent origination fee that has a six percent rate might allow for a buy down that reduces your rate by an eight of a percentage point for a quarter point increase in your points. Ask your lender what options are available. The interest rate you pay is typically related to the prime interest rate and your credit score. As the prime rate goes down, lending rates go down. People with higher credit scores typically receive a lower interest rate for their mortgage loan.

First Time Home Buyer