Choosing the Right Mortgage Loan

Choosing the right mortgage loan can be a difficult decision. Here are questions you should ask when comparing loans.

1. What is the loan's interest rate? This information will usually be shown when you get hot mortgage quotes on loans. Keep in mind that interest rates can be deceptive because they do not include other loan expenses. The mortgage with the lowest interest rate might not be the cheapest mortgage loan overall.
2. Do you charge points? Some lenders charge points, which means you will pay interest in a lump sum up-front in exchange for a lower rate on your fixed-rate mortgage. Usually, each point costs 1% of the mortgage amount. When you get hot mortgage quotes, keep in mind that the interest rate you see may be reduced by purchasing points.
3. What are the closing costs and any other fees? Closing costs can be significant, and they are usually not included in hot mortgage quotes. Make sure you ask for a good faith estimate of your closing costs before you begin the process. Lenders are required by law to give you this estimate within a certain period after you submit your application.
4. What is the loan's APR? Hot mortgage quotes will usually give you this information, but, if not, you can find it in your consumer loan agreement. By law, the lender must display the APR (annual percentage rate) of the loan in bold on the agreement. The APR is a better indication of the total cost of the loan than the interest rate alone because the APR factors in the total cost of borrowing (including fees, charges, etc.). Ideally, when shopping for hot mortgage quotes, you want the loan with the lowest APR.
5. Is there a pre-payment penalty? Another factor to consider when shopping for hot mortgage quotes is the pre-payment penalty. Some lenders will charge you a considerably penalty if you pay your loan off prematurely, which will be important to you if you decide to sell your home or refinance. Find out if there is a pre-payment penalty, and, if so, how much it is.
6. What is the term of the loan? You will usually see the term of the loan when you are comparing hot mortgage quotes. The term refers to the length of the loan, or how quickly the principal is paid off. In general, the longer the loan's term, the more you will pay in interest overall. On the other hand, the shorter the loan's term, the higher your monthly payments will be, but the more you will save in long-term interest expense.