How to Compare Mortgage Proposals and Select the Right One for You
- Shopping for a Mortgage
- It takes extra time to compare and negotiate mortgage proposals but spending an extra hour or two can save you thousands of dollars. For example, on a $300,000 30 year fixed rate mortgage, reducing your interest rate by just .125% will save you almost $8,000 in interest expense over the life of your mortgage
- Gather mortgage proposals from at least four lenders, including one mortgage broker. There are different types of lenders such as big, regional or local banks, mortgage brokers, mortgage bankers and credit unions and they are ALL competing for your mortgage business. Some mortgage lenders such as banks, mortgage bankers and credit unions are direct lenders, which means they lend you money directly for your mortgage, potentially allowing them to offer you a lower interest rate. Other lenders such as mortgage brokers do not fund mortgages directly but instead act as a personal mortgage shopper for borrowers and compare rates and fees from multiple funding lenders to find you the best terms for your mortgage, so you benefit from lender competition. Gathering proposals from at least four lenders including multiple types of lenders will ensure that you have a range of mortgage options, which puts you in a stronger position when you negotiate your mortgage.
- The table below shows interest rates and costs for lenders in your area. Contact multiple lenders to receive the best terms for your mortgage
- Borrower Tip
- Use our MORTGAGE COMPARISON CALCULATOR to compare mortgages and select the one that is right for you
- Where to Find Information to Compare Mortgage Proposals
You should treat the mortgage process like you would any other major purchase, such as buying a car. Shop around, compare mortgage proposals from multiple lenders and select the best proposal.
Follow the steps below to negotiate the best terms for your mortgage:
When you compare mortgage proposals keep in mind that interest rates and closing costs vary by mortgage program and length. For example, a fixed rate mortgage typically has a higher interest rate than an adjustable rate mortgage. In some cases borrowers consider different types and lengths of mortgages so be sure you are comparing similar programs when selecting a mortgage. Additionally, make sure the cost items, including discount points which you may choose to pay, are the same across all lenders so it is easier to compare proposals.
The table below shows you where on the Loan Estimate (LE) you can find 1) the interest rate, 2) estimated closing costs, and 3) the APR. Click on the rectangle icons to see where each figure is located on the Loan Estimate. Comparing these figures for multiple proposals will help you select the mortgage and lender that are right for you.
- One of the first items on the LE and easy to compare across lenders because it is a single figure
- Total of all closing costs including lender, appraisal and title fees as well as any taxes, prepaids and escrow payments
- Found at the bottom of page one of the LE
- The APR represents what your interest rate would be if it included all up-front lender and closing costs
- Use the APR to compare mortgage proposals from multiple lenders
- If you have proposals from two lenders that are offering the same interest rate but one APR is higher than the other, then you know the lender with the higher APR is charging higher closing costs
- Found at the top of page three of the LE