When shopping for a home loan, it is important to make sure that you compare mortgage loan offers to see if you are getting the best deal. But for many home owners, comparing home loans is not an easy task. Below are some easy steps so you can do to compare several different mortgage loan proposals and make sure you are getting the best possible home loan.
Verify that your loan originator has a National Mortgage Licensing System Number
The first step you will need to do is make sure that you are working with a licensed mortgage officer. Effective in 2010, both mortgage bankers and home loan brokers have to be licensed. Each loan originator must have a license number that is part of the National Mortgage Licensing System (NMLS). Each loan officer must display their NMLS number on any form of advertisement, website, and any other marketing materials. You should always ask a loan consultant if they have a NMLS number. Finally, loan originators can only do loans in states they have a license in. For example, if I have a mortgage license in Texas, then I can only do Texas home loans.
Compare Apples to Apples
The hardest thing to do when comparing a home mortgage loan is trying to compare mortgage offers from all the different companies. The reason for this is that many companies have different closing cost and offer different rates, but if you understand how to ask the right questions, this process can be easier.
First, don’t ask the question, “What is the best rate you can give me?” This question is so open ended and closing cost plays a major factor in the rate. The best rate a home loan lender can offer you will have the most closing cost. When trying to compare mortgage proposals from other home loan lenders, this can be tricky. Instead, you should ask the question, “What is the home loan lender closing cost associated with a 30-year FIXED rate home mortgage at X%?”
This question is direct and will make choosing a company much easier!
Every lender can tell you what the lender closing cost will be at a specific rate. For example, Lender A charges $2100 in lender cost for a rate of X% and Company B will charge $2500 in lender closing cost for the same rate. When comparing these numbers, it is easy to see that the Company A is offering the best deal!
When comparing closing cost, only compare the LENDER closing cost. Most lenders will estimate 3rd party charges like title company fees or attorney fees and prepaid items like property taxes and home owners insurance. These fees are estimated and are charged by other companies other than the mortgage lender . Let’s use the same mortgage lenders in the example above and say that Company A estimated prepaid and 3rd party fees at $3500. Company B estimated these fees at $2500. When you add their mortgage lender fees to the closing cost estimate, Company A is at $5600 and Company B is at $5000. It looks like Company B is offering the best proposal , but since these are only estimates, Company A is still offering the best deal since they have $400 less in LENDER fees. Think of LENDER fees as the charge for the interest rate. These are also the fees that the mortgage lender has control over!
Finally, when comparing home mortgage loans, compare like rate offers meaning that if you are getting a quote for a 30-year loan at 4.75%, make sure that all offers you are comparing have the same rate. Also, make sure you are comparing the rate with the same home loan program. For example, compare FHA mortgage rates with other FHA home loan rates. You do not want to compare a FHA home mortgage loan with a Conventional home mortgage loan since these are two different types of home loan programs.
Hopefully this will help when shopping for a mortgage loan.