Becoming a homeowner is something that many people aspire to. Owning a home offers you more security in your life, and it’s something that you can be proud of. But home buying is one of the largest investments most people will make in their life time, so doing it right is very important. When shopping for a mortgage, you must do a ton of research, which will help you find what you are looking for and possibly save you a significant amount of money.
Not all lenders are created equal, which means that, if you just do business with the first one that crossed your path, you won’t have anything to compare him with. Also, more importantly, some lenders can give out loans that better suit your needs, but others will present you with various options that will not work to your advantage. It is imperative to know how to compare mortgage lenders, and is the only way to avoid turning your life into a nightmare.
How to Compare Mortgage Lenders
Finding the right mortgage lender for you can only be done by shopping around and comparing several lenders. When looking at various mortgage loans from various lenders, the first thing that will get your attention is the interest rate. Comparing mortgage lenders based solely on the interest rate is wrong, as there are many other factors that make up a loan. The interest rate has a huge impact on how much the mortgage loan will cost you, but these other factors are not to be taken lightly. Here are a few steps that you should take when comparing mortgage loans from different mortgage lenders:
- Research several mortgage lenders in the area. You can do the research online, by calling their offices, or by visiting their locations to talk to one of the officers and pick up brochures. Remember that the interest rate is not the only thing you should look for when shopping for a mortgage loan. Some lenders may offer lower than usual interest rates, but that doesn’t mean that you’ll be paying that interest rate for the duration of the loan.
- Make sure that you are comparing the same type of loans. It’s important to understand that interest rates change daily, so you should compare rates on a specific date. Also, make sure that you are not comparing the interest rates on loans with different terms. Comparing rates on a 30-year to rates on a 15-year loan will not help with your decision, as this is like comparing apples to oranges.
- Compare each lender’s closing fees and points charged. Remember that each origination point represents 1 percent of the purchase price. Also, you can pay for more mortgage points in order to have your interest rate reduced. Points are not the only expense that you will have when taking out a mortgage loan. There are also closing costs, such as the appraisal fee, the title fee and many others, that you should take into consideration, as they can make your closing costs very high.
- Find out if there is a prepayment penalty on the loan. If there is a penalty for paying off your mortgage loan too early and you’re unsure of your plans for the next few years, then maybe you should keep looking. The prepayment penalty will make selling or refinancing your home in the near future very difficult and expensive.
- Find out how much your down payment will have to be. Most lenders require a 20 percent down payment, but how much you will be able to pay will influence the amount of money that you will be paying for the duration of the loan. This means that, depending on the amount that you will be able to come up with as a down payment, you will save money, or spend more.
Finding a good mortgage deal is influenced by several factors, and not only the quoted interest rate. Closing costs and other fees can rack up quickly and turn what you thought was the perfect mortgage loan for you into a nightmare. A mortgage loan is something that you will have to pay over the next fifteen or thirty years, so properly researching each lender and what they offer will guarantee that you will find a mortgage loan that suits you and your budget.