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Comparing different mortgage options: Tips for success



When potential homeowners or those currently with a mortgage begin searching for interest rate quotes from various lenders, they’ll soon find they might have their work cut out for them. Mortgage loan officers quote interest rates, fees and monthly payments to potential borrowers all day long. It’s easy for them. It’s what they do for a living. But those in the industry do admit sometimes it can be a very confusing process comparing one lender’s offering with another. That is unless you follow these very important tips.

The first tip is to decide the exact type of loan you want. It’s an impossible task comparing a 30 year program from Lender A with a 15 year loan from Lender B. Yes, they’re both fixed rates and only the term is different but the monthly payments are much different and the amount of interest paid to the lender is significantly so. No, instead choose a mortgage and stick with it.

Next, offer up a simple scenario for a rate quote and ask all lenders to quote on that scenario. For example, if you want a 15 year fixed rate loan, ask the loan officer for:

A 15 year rate with no points

A 15 year rate good for 30 days

Your lender fees

Lenders can offer rates with a variety of points. A lender can quote a rate with no points or a rate with one-half a point, one point and so on. As more points are paid, the rate will be lower. Keep it simple and get a no-point quote.

Lenders can lock in your interest rate typically as short as five to 10 days and as long as six months or even longer in some cases. The shorter the lock period the lower the rate. Keep the lock period the same when getting quotes.

Ask for the lender fees on the loan and ignore third party fees. Lenders don’t have any control over third party fees such as title insurance or settlement fees. Compare one lender’s fees with another along with the rate.

Finally, make sure you do your rate shopping on the same day at the same time of day. Rates can change overnight and can even change during the course of a business day. Rates in general could move up or down depending upon the time of day. If you follow these tips, you’ll truly be able to compare apples and apples.

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