When you shop different lenders you get several interest rate and cost options. Sometimes it can be very easy to compare them. See the example below:
- Lender 1 – Rate Quote – 4.5%, Loan Fees – $1,000
- Lender 2 – Rate Quote – 4.5%, Loan Fees – $2,000
- Lender 3 – Rate Quote – 4.5%, Loan Fees – $3,000
In this case, it’s easy to figure out that Lender 1 is an obvious choice. However at other times it can be very confusing to find out which one is the best option. Let’s take a look at an example below:
- Lender 1 – Rate Quote – 4.5%, Loan Fees – $3,000
- Lender 2 – Rate Quote – 4.625%, Loan Fees – $1000
- Lender 3 – Rate Quote – 4.375%, Loan Fees – $4,000
Annual Percentage Rate (APR) was introduced to make rate comparisons easy. But, different lenders calculate APR differently and hence it’s not the safest way to compare rates.
Here are some tips to rate shop, so that it’s really easy for you to compare different rate quotes:
Tip #1 – Do not just compare rates, compare fees as well.
A lot of borrowers make a simple mistake – they call different lenders and compare the rates offered. They forget to ask for their fees. A lender with a lower rate could still turn out to be more expensive if their fees are significantly higher than someone with only a slightly higher rate.
Tip #2 – Ask all the lenders to quote you with the same closing cost.
For example, ask them to give you a rate with $2000 closing cost. If you are looking for a no cost refinance, ask for all quotes with zero cost. That way, all you have to do is compare the rates.
Tip #3 – Shop mortgage rates in a very short period, ideally within couple of hours.
Mortgage rates change frequently. Else, you won’t be comparing apples to apples. If you shopped with Lender A on Monday and Lender B on Tuesday, the market may be very different.
Tip #4 – Don’t always go with the lender with lowest rates.
This may shock you, but it’s true. Consider the expertise and credibility of the mortgage lender. Google them to see if they have been covered favorably in media. Check their Yelp and Google+ rating and read clients’ reviews.
A well-versed consultant will ask you many questions about your short and long-term goals, and assist you in choosing a loan program that is truly suited to those goals.