Mortgage shopping can be a confusing process. With so many different factors to consider, how can you make sense of it all and select the best option available? Here are a few mortgage comparison tips to help you make smart mortgage and home buying decisions.
1 – Look Beyond Interest Rates
So often, buyers will rate shop by calling up different mortgage companies and asking for the latest interest rates. Unfortunately, this approach does not necessarily get you the best deal. Interest rates are just one part of the equation. Your costs are a combination of interest rates, closing costs, and terms. So, one of our most valuable mortgage comparison tips for Massachusetts home buyers is to look beyond just interest rates.
It’s very common for mortgage companies to offer lower interest rates with higher closing costs, and higher interest rates with lower closing costs. Paying fees such as points can lower your interest rate, but is not necessarily the best option. Points are essentially interest that you pay up-front and can be more expensive than other options, depending on how long you keep the loan.
So, when exploring mortgage options, be sure to ask about more than just interest rates. Inquire about rates, closing costs, and basic mortgage terms for an accurate picture of available options.
2 – Compare Apples to Apples
There are two types of comparisons that you will make as a home buyer. The first is to evaluate different loan programs, such as FHA vs. Conventional and/or fixed rate vs. adjustable rate. The second is to compare different lenders offering the same programs.
When reviewing loan programs, consider these factors:
- Interest Rates
- Down Payment Requirements
- Up-front and Monthly PMI
- Qualification Criteria
- Other Loan Terms (Adjustment period and thresholds, early payoff penalties, etc.)
When comparing lenders, be sure to ask about the same loan programs. Rather than asking one lender about a fixed rate and another about an adjustable rate, ask about the same from both. This way, you’re truly looking at lender differences rather than loan differences.
Additional Mortgage Comparison Tips
For additional mortgage comparison tips, follow us on social media. As Massachusetts real estate attorneys, we aim to continually provide helpful tips and information for buyers throughout the Commonwealth. Once you have found a home to purchase, don’t forget to contact us for assistance with reviewing your Purchase & Sales agreement and closing.