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How to Compare Mortgage Loans among Different Lenders

When you are considering taking out a loan, it’s important to compare your options before making a decision. Yet, comparing loans from different lenders can be complicated. Comparing mortgage loans can be particularly complex due to the fact that most mortgage packages are comprised of several features, including interest rates, closing costs, and points.

What Are Points?

Points are the fee you pay upfront at closing to the lender. Each point represents 1 percent of the loan amount. Points are paid to decrease your loan rate. Most mortgage lenders will give you the opportunity to select from a variety of point and rate combinations. Consequently, when comparing rates from different lenders, it’s important to ensure you are also comparing the related points.

What Are Closing Costs?

Closing costs are those fees and charges related to the cost of your loan, including the costs that lenders charge for approving and processing your loan. Such fees could include transfer charges and title and escrow charges. Be sure to compare the related fees when comparing lenders, as many of these fees can vary among lenders.

Comparing Loan Features

Make sure you compare all of the features of loans from different lenders. This would include mortgage insurance payments, credit and cash reserve requirements, prepayment penalties, and conversion options.

What Is the Lock-In Period?

Make sure you ask about the lock-in period for each loan you’re comparing. Both the interest rate and the points quoted to you by the lender are guaranteed during this period. It’s common for loans to have lock-ins ranging from 30 to 60 days, but some lenders offer a much shorter lock-in period. In most cases, a longer lock-in period means a higher loan price.

Finally, make sure you obtain interest rate quotes from different lenders as closely together as possible. It’s common for interest rates to change quickly, even on a daily basis.