Mortgage Rate Information
How To Compare Mortgage Rate Offers From Multiple Lenders
First, make sure you are comparing current mortgage rates for the same type of mortgage. Mortgage rates and closing costs can change significantly from one day to another, so if you are comparing offers from multiple lenders it must be done on the same day. For example, if you are shopping mortgage rates and have a quote for a 30 year fixed at 3.5%, only compare it to other 30 year fixed quotes at 3.5%.
Next, compare the net total of all points and lender fees for each mortgage (ask for an Initial Fee Worksheet), that is the price of the mortgage. The lender with the lowest cost has the best mortgage rates.
If you are refinancing, you will also need to review the cost of title insurance, closing/attorney, and appraisal. The company with the lowest combination of points, fees and third party costs for the same rate and product has the best mortgage rates.
Things to Watch Out For
Good Faith Estimates are just estimates. Look for lenders that guarantee their closing costs up front.
There is nothing wrong with No/Zero Closing Cost Loans. Just be aware that you will be looking at higher mortgage rates in exchange or if you are refinancing, the closing costs could be included in your principal.
Paying higher points and fees will result in lower mortgage rates. For example, at 4% you may have zero points and fees, while at 3% you may have points and fees of $3000. To get the best mortgage rates, you must estimate how long you will have the mortgage. Also, make sure you are comparing current mortgage rates when doing your comparison.
APR
Definition: The annual percentage rate, or APR, is the interest rate charged on the amount borrowed. It reflects the annual cost of borrowing money. APR makes it easier to compare different loans and credit cards, because you can easily see which loan/credit card would be cheaper. For example, a loan with a 10% interest rate is less expensive than a loan with a 15% interest rate (assuming other things are equal).
APR Limitations
Unfortunately, all other things are not equal. APR can include more than just the interest cost of a loan. On a mortgage, APR might include Private Mortgage Insurance, processing fees, and discount points. There are other fees and charges that may or may not be included in a given APR quote. Therefore, you need to look closely at each and every APR.
You can't simply rely on an APR quote to evaluate a loan. You need to look at each and every charge and expense related to your prospective loan in order to judge whether or not you're getting a good deal. In addition, look at the bigger picture; you need to know how long you'll be using a loan to make the best decision. For example, one-time charges up front may drive up your actual cost on a loan, even though an APR calculation might assume those charges are spread out over a longer lifetime (and therefore the APR would look lower).
