So, you want to buy a house and are looking online at home mortgages. Whether you want a fixed-rate mortgage, an adjustable-rate mortgage, or any of the other types of mortgages available, there are a few things you should look at when comparing the offers.
The interest rate is the first and most obvious. Since most of your payment will go toward interest for the first few years and not much will go toward paying off the loan, your interest rate is very important. The amount you pay each month can change a lot if the interest rate is just a little bit different. And this difference will be bigger the more you owe on your loan. Even though 1/8 of 1 percent might not make a big difference in your payment, 1/2 of 1 percent definitely will. And if money is tight, every dollar will be important. One way lenders lower rates is by charging you "points," which is just money paid up front to get a slightly lower rate. Make sure you know what fees you are being charged, because you may have to pay a lot more to get a loan from one lender than from another.
The APR is something else to look at. It's something you see all the time, but what does it mean to you? The Annual Percentage Rate is actually the cost of interest plus any other fees charged by the lender over the life of the loan. The interest rate will always be lower than the APR. By comparing the interest rate and annual percentage rate (APR) of one lender to those of another, you can figure out who is charging more fees. For example, if one lender offers an interest rate of 6.35 percent with an APR of 6.54 percent and another lender offers an interest rate of 6.25 percent with an APR of 6.97 percent, the second lender is charging more fees... and will cost you more in the end. Ask the online lenders what fees are included in the quotes they give you for home mortgages so you can compare them fairly.
Some other things you could compare are:
- Ask for an estimate in good faith (compare the GFE from each lender and be sure that everything is as you understood it to be)
- What are the costs and fees for closing? (this money will need to be paid upfront or financed in the loan which will then affect your payment somewhat)
- Is there a fee if I pay it off early? (many loans do not have pre-payment penalties and even if yours does, it may or may not be an issue, depending on the conditions)
- The terms of the lock-in (is it for the same amount of time, what if interest rates go down, etc.)
Customer service is important in a big way. If you have questions as you compare, give them a call and see how useful and timely your conversations are. If it's hard for you to get answers before you start your loan, it's likely that you'll have trouble during the loan process as well. You want a lender who answers your questions and calls you back quickly.
When you look for home mortgages online, you can submit your information once and get quotes from several lenders at the same time. Then you can compare the offers and make your choice after looking at everything they have to offer.
