How to Compare Mortgage Quotes
The first challenge is selecting the type of mortgage loan best suited for your needs. You can do some initial research on your own but at some point you need some direct, one-on-one advice from a residential mortgage loan officer. Mortgage loan programs come in a variety of shapes and sizes and even though there are fewer loan choices today compared to a few years ago, there are still multiple considerations.
For example, should you take a 30 year fixed rate mortgage or a 15 year? That depends first on whether or not you can qualify for the shorter term. A 30 year fixed rate loan will have lower payments compared to a 15 year mortgage. Higher payments require more household income in order to qualify.
On the other hand, a 15 year mortgage saves more in long term interest compared to a 30 year loan. So which is better for you? Maybe neither. Maybe a 20 year or a 25 year term might be your best choice.
Fixed or Adjustable
Another option is the feature of the interest rate. Is the rate fixed over the life of the loan or can the interest rate change at some point in the future? Adjustable rate mortgages, or ARMs, can offer lower start rates compared to fixed rate offerings. Yet the very nature of ARMs means it’s possible for payments to be higher in the future than what’s available in the fixed rate market today.
Points or No Points
Once the loan term and type are selected, the next consideration is paying discount points, or simply “points.” A point is represented as one percent of the loan amount and reduces the mortgage rate on the loan by approximately one-quarter of one percent. Two points can reduce a payment by about one-half percent and so on. Your loan officer can help you determine how much, if any points are a good choice.
Frankly, we offer the best rates around and we rarely charge points, or closing costs!
Choosing the Quote
Only after deciding on a specific loan program should you compare mortgage rates from different lenders. You then contact a mortgage company and ask for a quote on the very same loan program. Instead of asking, “What are your rates today?” you ask:
“What is your rate today on a 30 year fixed rate loan with no points on a loan amount of $400,000 covering a 30 day period? My credit is excellent and I have 20 percent down. As well, please provide me with a list of your lender charges.”
Only by getting specific with your request will you be able to compare one lender’s mortgage quote with another; don’t let the process confuse you and always ask for the lender fees. Even when lenders have the same rate on the same loan program, sometimes lender fees can vary by as much as $500 or more.
Remember that when you get a rate quote, you set the rules for quoting, not the lender.