Loan Comparison: Look Before You Lock!

When shopping for a mortgage, it's important to compare mortgage quotes and closing costs to secure your best mortgage. Now it's time to lock in your loan rate. A final loan comparison may help you find a better deal. Here's what to look for in addition to lower mortgage rates.

Discount points: Lenders may quote rock-bottom mortgage rates, but add more to discount points. A discount point is one percent of your mortgage amount and amounts to prepaid interest. If your mortgage amount is $250,000, one point is equal to $2,500.

Lender fees: Examples of lender fees include loan origination fees, document preparation fees, and underwriting fees. Lender fees vary by lender; the Federal Trade Commission recommends comparing lender fees line-by-line for finding your best deal. This may lead to changing lenders before you lock in your mortgage rate. You can work with any mortgage lender licensed to do business in the state where the home you're buying is located regardless of the company's actual location.

Closing costs: Lenders typically work with title companies and closing agents, but you can compare estimated fees for title work, title insurance, and closing agent fees. You may be able to change or negotiate with title companies, closing agents, and hazard insurance companies, but according to Fox Business, some costs are not negotiable. Examples of non-negotiable fees and costs include appraisals, credit report fees, document recording fees, transfer taxes, and prepaid property taxes.

Home inspections and warranties: Home inspections can protect against undetected home repairs; home warranties pay all or part of costs associated with allowable repairs made during a specified period after you buy a home. Shop and compare coverage and costs for these services. The LA Times recently reported that consumers may choose to save toward home repairs instead of paying $400 to $600 a year for limited repairs covered by a home warranty.

A Final Mortgage Comparison Before You Lock

An important aspect of your mortgage comparison involves checking your mortgage terms as well as comparing estimated closing costs.

The Consumer Financial Protection Bureau (CFPB) advises how to prepare for mortgage closing by reviewing all mortgage documents and asking questions about any costs or documentation you don't understand, and to keep asking until your concerns are resolved. This advice also applies to checking your loan papers and doing a final loan comparison before locking in your mortgage rate. Don't be rushed into locking in your mortgage rate; it's important not to rush through a mortgage transaction without understanding all mortgage terms and closing costs. If your questions aren't answered to your satisfaction or you're otherwise unsure of a mortgage transaction, changing mortgage lenders may be preferable to proceeding with a mortgage that you don't fully understand. Avoid unnecessary expenses and potential misunderstandings after closing by ensuring that you've made your best deal on a mortgage that won't surprise you after it's closed.

Mortgage lenders want your business and understand that taking out a mortgage is the largest financial transaction most people will ever make. Finding a lender that answers your questions, explains things that aren't clear, and works with you to achieve your full satisfaction with a mortgage is worth the time and effort required. Request mortgage quotes from our network of mortgage lenders before locking in your rate to see if better mortgage terms are available.

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