Comparison shopping for a mortgage
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It’s pretty easy to shop rates at websites HSH.com or BankRate.com, which list current mortgage rates offered by dozens of lenders. But make sure you also shop for fees. Each lender you consider should provide a ‘good-faith estimate’ of the total fees, including the cost of appraisals, title insurance, processing and ‘points.’
Typically, these fees would amount to anywhere from $0 to $6,500 for a $400,000 loan. (In some cases, lenders offer no-cost/no-fee loans but charge a higher interest rate for the privilege.)
To make apples-to-apples comparisons when you’re getting apples-to-oranges offers, use the monthly payment calculator at MortgageGrader.com, adding the fees (if any) to your loan balance.
For instance, Lender A offers a no-cost loan at 5.25%. Lender B offers a 5% rate, but will charge $6,000 in fees. Which is the better deal?
You’d plug in the loan balance of $400,000 at 5.25% at the Mortgage Grader site to find that your monthly payment would be $2,208.81 with Lender A’s offer.
To compare the offer from Lender B, you’d plug in a loan balance of $406,000 (the loan amount plus fees) at 5% to find that your monthly payment would be $2,179.50. Lender B’s deal would save you nearly $30 a month, or $10,500 over the 360-month life of the loan.
That’s not to say you may not run into a few extra fees you weren’t expecting -- at least that’s been my experience -- but the Internet can help in comparing mortgages.
-- Lauren Beale