So you’re interested in buying a house and you’re looking at home mortgages online. Whether you’ve decided on a fixed rate mortgage, an adjustable rate mortgage or any of the other various types of mortgages offered, there are several things to be sure to look at when comparing the offers.
The first, and most obvious, is the interest rate. Since for the first few years your payment will be mostly interest with little going towards equity, your interest rate is very important. A slight difference in interest rate can make a big difference in your monthly payment. And the larger your loan balance, the larger this difference will be. While 1/8 of one percent might not affect your payment by a huge amount, 1/2 of one percent certainly will. And if your finances are tight, then every dollar will count. One way lenders lower rates is by charging you “points” which is simply money paid upfront in order to get a slightly lower rate. Make sure you are aware of any fees you are being charged as you may have to pay a lot more to get the loan from one lender than from another.
Another thing to look at is the APR. You see it all the time … but what does it really mean to you? The Annual Percentage Rate is actually the cost of interest plus any other fees being charged by the lender over the life of the loan. The APR will always be higher than the interest rate. By comparing the interest rate and APR of one lender to the interest rate and APR of another lender, you will get an idea of who is charging more fees. For example, if one lender offers an interest rate of 6.35% with an APR of 6.54% and another lender offers an interest rate of 6.25% with an APR of 6.97%, the second one is charging more fees … and will ultimately cost you more. Ask the lenders what fees are included in your quotes for home mortgages online so you can compare apples to apples.
Some other items to compare would be –
1. The lock-in terms (is it for the same amount of time, what if interest rates go down, etc.)
2. Is there a pre-payment penalty (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)
3. What are the closing costs and fees (this money will need to be paid upfront or financed in the loan which will then affect your payment somewhat)
4. Ask for a Good Faith Estimate (compare the GFE from each lender and be sure that everything is as you understood it to be)
Customer service is extremely important. If you have questions when making your comparisons, call them and see how timely and informative your conversations are. If you have trouble getting answers before you start your loan, you’re likely to have trouble during your loan process also. You want a lender who is quick to return your calls and responsive to your questions.
Searching for home mortgages online simplifies this process as you can submit your information one time and get quotes from several lenders at once. Then you can do your comparisons and make your decision after looking at the offers from all angles.