How to Compare Mortgage Lenders
Your Berkshire Hathaway HomeServices network professional may be able to help you find good lenders, but it’s up to you to determine which lender and loan program is right for you.
In order to get an accurate side-by-side comparison, you’ll have to apply for a mortgage to a minimum of three lenders. They each will pull your credit and are required to provide you a three-page loan estimate within three days of your application. This is the lender’s solid offer that can’t change within the grace period you’ve agreed upon.
Choose the terms you want. In a low-interest-rate environment, you won’t overpay if you get a fixed rate mortgage, as interest rates change over time and are more likely to go up than down. A variable or adjustable rate mortgage costs a little less but is preferable only if you think you’ll be selling your home after a short time.
Make sure you’re comparing apples to apples. Supply each lender you interview with the same personal financial information, home price, down payment, type of loan, and other pertinent information.
Once you receive the loan estimates, compare line by line, which is easy because all lenders use the same loan estimate sheet, according to Bankrate.com. The APR stands for annual percentage rate, which is the true cost of the loan. The advertised or non-application rate quote does not include the additional loan costs which vary from lender to lender. That’s why lenders are required to show the APR as well as the advertised rate.
There are a number of reasons why the loan estimates may vary, including which credit reporting bureau they pull your credit from, junk fees, and day and time you submit your application online. Examples of finance charges include but are not limited to the following fees: Application, administration, processing, underwriting and/or funding. If you don’t understand the reason for a fee, ask for an explanation. Typical fees are clear, and include:
· Application fee
· Credit report fee
· Appraisal fee
· Underwriting fee
· Property taxes and other government fees
Mortgage rates can change throughout any given day. Rate swings of a quarter of a percent, while not a common occurrence, does happen. On a $200,000 home, a ½ point reduction in a 30-year fixed-rate interest rate would reduce monthly payments by $56 per month or $20,000 over the life of the loan.
What does that mean? It means that you need to do your rate shopping not only on the very same day, but at the same time of day. You might get a rate quote from a lender on a Friday morning of 3% then call another lender the following Monday afternoon and get a quote of 2.75% for the very same loan. That doesn’t mean the second lender is always lower than the first lender, it means the markets may have changed and rates have gone up or down. You need to call back the first lender and get their updated rate quote.
Allow your lenders to earn your business, just make sure they’re all competing under the same conditions: the same loan program at the same time.