The same care and consideration you give to finding the right house should be applied to your search for the right mortgage lender. For most home buyers a major determining factor in selecting a lender is the cost of the mortgage loan. But how do you determine the cost of a mortgage loan?
Shopping for a Mortgage Loan
While most buyers concentrate on interest rates, it is best to look at all the costs associated with a mortgage loan. Mortgage loans include the quoted interest rate, points and closing costs.
More than Just Interest
A number of fees are associated with the mortgage loan, including:
- Appraisal – A carefully documented opinion of value by a licensed, professional appraiser.
- Credit Report – A detailed report of your credit, employment and residence history prepared by a credit bureau.
- Principal – The amount owed on a mortgage which does not include interest or other fees.
- Document Fees, Loan Fees and Processing Fees – Miscellaneous fees charged by the lender.
- Discount Points – Points paid in addition to the loan origination fee to get a lower interest rate. (1 point = 1 percent of loan amount)
- Origination Points – the total number of points paid by the borrower at closing. (1 point = 1 percent of loan amount)
- Interest Rate – A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.