Many homeowners looking for a mortgage are most concerned with receiving the lowest interest rate and monthly payment amount. There are many other expenses involved in taking out a new mortgage; If you focus solely on interest rates and payment amount it is easy to overpay for your new mortgage. By shopping from a variety of mortgage lenders and carefully comparing interest rates, application fees, lender fees, and closing costs you will avoid making many common homeowner mistakes; mistakes that could cause you to overpay thousands of dollars for your mortgage.
Comparing mortgage offers from a variety of lenders can save you a lot of money. Mortgage offers and interest rates can vary considerably from one lender to the next; especially if you have less than desirable credit. When you shop for a mortgage you need to take into consideration all fees and points the lenders charge. If a fee seems too high compared to other lenders, ask the lender why this fee is so high compared to other mortgage offers. The Annual Percentage Rate is a good starting place when comparing mortgage offers. This Annual Percentage Rate (APR) factors in interest rate and lender fees; however, it does not include all expenses, like closing costs. If lender will give you their “Good Faith Estimate,” this is the best way to compare offers because it will outline all expenses, including the closing costs.
If you would like to build equity in your home rather than find the lowest monthly payment for your mortgage, consider a mortgage with a shorter term length. This will reduce the amount of interest you pay to the lender over the duration of the mortgage and build equity at a much faster rate. You may even qualify for a lower interest rate. Mortgage loans with 15 year term lengths are a popular choice for homeowners refinancing their mortgages for this reason. To learn more about finding the best mortgage loan for your situation while avoiding common homeowner mistakes, register for our free mortgage guidebook: “Five Things You Need to Know Before Refinancing Your Mortgage.”