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Comparing Mortgage Loans Origination fees. Closing cost fees. Interest rates. Pre-paid items. If you’re not good with numbers, shopping for the best mortgage loan can seem overwhelming. But since a mortgage is a long-term commitment, comparing the rates, costs and features of various mortgage loans is essential if you want to choose a loan that you’ll be happy with years from now. But with all the confusing line-item fees and rates, how do ensure that you’re comparing apples to apples? Consider the following suggestions for comparing mortgage loans: 1. Obtain several good-faith estimates. A good-faith estimate is an itemized listing of fees and costs associated with your potential mortgage loan, and a mortgage lender or broker must provide it within three days of your application for the loan. Once you initially provide a minimal amount of information – such as description of the property, personal credit information and desired loan terms – each lender can identify appropriate loans and generate good-faith estimates (conditional upon further underwriting). All good-faith estimates come in the same government-mandated format, making it easier to compare lenders. Major elements include: itemizations of lender fees, including origination fees, discount fees, application fees, etc third-party fees including title insurance, appraisal fees, attorney’s fees and survey fees pre-paid items for things like insurance, property taxes and HOA fees and a clear break-down of your interest rate and the elements that make up your monthly payment. Lastly , we recommend that you get good-faith estimates from at least two or three lenders – and that you obtain these estimates from different kinds of providers, such as banks , mortgage bankers, mortgage brokers and credit unions. This way, you can compare rates and costs – line item by line item – from a variety of lenders.
2. Have the lenders identify guaranteed vs. estimated fees. Initial good-faith estimates are conditional on the approval of the lender’s underwriters, so further examination of the application might result in higher or lower rates and fees. Have each lender indentify up front which rates and fees are guaranteed not to change and which might change. Better yet, ask your lender if he or she will guarantee that final settlement costs will match exactly the good-faith estimate.
3. Watch for low-balling. Some lenders will low-ball third-party fees like taxes, insurance and HOA fees in order to make their estimate more attractive. Then, when it comes time for closing, these fees end up higher, and the lender can place blame on the third party. Compare estimated fees among providers to identify potential low-balling.
4. Determine the lock period & make sure rate quotes are from the same day from each lender. The good-faith estimate doesn’t necessarily identify the lock period – i.e, the period of time before which the quoted interest rate expires. Be sure that the lender indentifies the lock period for each good-faith estimate. Also make sure that rates being quoted from each lender are on the same day’s pricing. Interest rates change at least on a daily frequency. See my daily rate lock advisory link for advice of when to lock-in your interest rate.
5. Let lenders compete. Share all your good-faith estimates with your potential lenders to see if they’re willing to match or beat the most favorable estimates. Careful comparison – and old-fashioned competition – can help you get a mortgage you’ll be happy with in the long term. 
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