I'm Looking at These 4 Things When I'm Picking a Mortgage Lender

I will soon be buying a home, so I've been spending my time lately shopping around for a mortgage loan. I've gotten several quotes from different mortgage lenders, and there are a few key things that I'm looking for as I compare the options that are available to me.

Here are the four factors I'm considering to help me get the right loan for my particular situation.

1. Interest rate

The most important thing I'm focused on is the interest rate on the home loan. That's because the mortgage rate I pay will affect both my monthly payment and the amount I have to pay over time for the privilege of borrowing.

Even a small change in interest rate can have a big impact when borrowing a lot of money for a home. For example, for each $100,000 in mortgage debt, you'd pay $682 in principal and interest for a loan at 7.25%. But at 7.75%, you'd pay $716.

Since I'll be borrowing well over $100,000 for my new home, the difference in cost at different interest rates will be even more substantial. That's why getting a low rate is a huge priority for me.

2. Points

I'm also looking at whether my mortgage lender is going to charge me any points or not. Mortgage points are prepaid interest. You can pay upfront to buy down the interest rate and reduce the amount of interest you pay over time.

Points typically cost 1% of the loan amount and reduce the interest rate on the loan by 0.25%. I am not interested in buying points. Since mortgage rates are high right now, I'm hoping they will eventually come down and I'll be able to refinance my loan in the coming years. As a result, it makes no sense for me to prepay a lot of interest to buy down my rate for a loan I probably won't keep.

When I compare loan offers, I make sure a lender isn't charging points. If two lenders offer me the same rate but one requires me to pay for points, that lender is actually offering me a higher rate even though they seem the same on paper. By paying attention to this issue, I can compare apples to apples and not get tricked by a lender that seems to be offering a competitive rate but is charging me extra to get it.

3. Origination fees

Mortgage loan origination fees are a fact of life and they can total a few hundred or even a few thousand dollars. Still, I want to keep these upfront costs as low as possible. As a result, I'm checking what different lenders will charge me when I compare loan options.

4. Closing timeline

Finally, I'm paying attention to the timeline for closing. I want to be ready to close on my mortgage loan ASAP, and while some lenders are scheduling closings 30 days out, others are scheduling six weeks or even 60 days out. A long closing would interfere with my ability to move into my home as soon as the sellers are ready to vacate, which is my goal.

If you're comparing mortgage lenders, you may also want to consider these issues as well. By looking at all of these factors, you can make a fully informed choice about which lender is right for you.