How to Compare Mortgage Quotes
Mortgages are large loans that are made to individuals who use a house as collateral. Usually the mortgage is used to purchase the house and if the individual fails to repay the loan then the company may seize the house to cover the individual's obligations. Mortgage quotes depend on the credit score of the borrower, the amount of the loan and the current interest rates.
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Instructions
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1
Compare the duration of the loan. For example, many mortgages are 15 years or 30 years. Longer mortgages will have lower monthly payments but will charge more interest over the life of the loan.
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2
Compare the interest rates. The lower the interest rate the better. However, be aware of introductory rates that only last for the first year or two of the loan. These introductory rates are different than adjustable rate mortgages.
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3
Compare discount points. Points are a part of the closing cost and equate to a fee of one percent of the loan per point. For example, if a mortgage for $200,000 had 2 points, the fee would be $4,000. If you need to minimize closing costs, loans with no points are better. However, paying points up front can reduce the interest rate so if you plan to stay in your home for a long time paying points can be advantageous.
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Compare the type of mortgage. There are fixed rate mortgages and adjustable rate mortgages. Fixed rate mortgages have a single rate for the entire period. If interest rates are low, you can lock in that rate for the entire mortgage. Adjustable rate mortgages have a fixed rate for a specified time period and then are usually adjusted annually. For example, a 5/1 adjustable rate mortgage has the fixed rate for the first five years and then adjusted each year after that. If interest rates are high when the mortgage is signed, an adjustable mortgage may be the best option.
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Compare the closing fees. Lenders are required by law to give their best estimate of the closing fees for the loan, which typically run between 3 percent and 5 percent of the loan total.
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Tips & Warnings
Ask if there are any penalties for repaying the loan early.
