How to Compare Mortgage Deals
- 1). Get quotes from lenders. Look at online lenders, local banks and credit unions. Don't forget HUD-approved lenders or VA lenders, if you are eligible. Try to get all of your quotes during a small period of time, such as a week or so, since inquiries can hurt your credit score. Most credit bureaus group loan quotes into one inquiry, if they are close together.
- 2). Make sure you know what type of mortgage you are looking for, and only get quotes on that type when making a comparison. A 15-year, fixed-rate mortgage is likely to have a smaller interest rate than a 30-year, fixed-rate mortgage, but monthly payments will be larger. Adjustable-rate mortgages, interest-only mortgages, balloon mortgages and other types of creative financing will have different rates as well.
- 3). Look at total cost of the loan. Most buyers look only at the affordability of monthly payments, but you also will want to know how much you are paying in interest, fees, insurance and other such factors. If you will be charged private mortgage insurance (PMI), the rates for this also need to be considered among different lenders.
- 4). Factor in fees, points and closing costs. These can be folded into your mortgage or paid upfront, but you need to consider them when comparing the mortgage cost. If one company offers a lower rate but requires you to pay more points, that deal may not be cheaper after all.
- 5). Get good faith estimates or pre-approval from the lender that offers the best deal. An online mortgage quote is just a quote. When you select a deal, speak to the lender and get a rate that is locked in for a set period of time before you begin looking for a house. This way, you will know for sure that a deal is yours if you find a house and you won't be looking in the abstract.
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