Two lenders can look at the same buyer, on the same day, and offer different rates and fees. The lender with the lowest rate may charge thousands more at closing. The lender with “no closing costs” may charge a higher rate every month. You do not need to become a banker to compare them. You need the same paper from each lender, made on the same day, with the same loan choices.
Get at Least Three Written Loan Estimates
A pre-approval tells you a lender may lend to you. A Loan Estimate shows the proposed loan and its costs. Ask several lenders for the same kind of loan, the same down payment, and the same lock period. Compare offers made on the same day because rates move.
Do not settle for a rate sent in a text message. Ask for the full Loan Estimate. It puts the important numbers in the same places, which makes it harder for a pretty sales pitch to hide a bad fee.
Check Whether the Low Rate Costs Points
A point is money paid up front to lower the interest rate. One point equals 1% of the loan amount. On a $400,000 loan, one point is $4,000. That can be a good trade if you keep the loan long enough, but it is not a free discount.
When one lender shows a lower rate, look for points on page 2 of the Loan Estimate. Compare zero-point offers with other zero-point offers, or the same number of points with the same number of points.
Look at Both Cash Today and Cost over Time
Cash to close tells you what you need to bring before you get the keys. The monthly payment tells you what the loan asks from your budget. You need both numbers.
Also look at the five-year comparison on page 3. It helps show how much you will have paid and how much loan balance will be left after five years. APR is another clue. It mixes the rate with many loan costs, but it is not perfect. Use it as a warning light, not the only answer.
Ask What Can Change Later
A fixed-rate loan keeps the loan rate steady. An adjustable-rate loan can change after its starting period. A temporary buydown makes the first payments look smaller, then steps up. A lender credit can lower your cash today while giving you a higher rate.
Ask the lender to show the full payment in the first year, the first year after any change, and the highest payment allowed when the loan can adjust. If the answer only sounds good for year one, it is not the whole answer.
Make the Lenders Compete
Once you have written offers, show the stronger one to the other lenders and ask if they can beat it. A lender may lower a fee, reduce the rate, or change the points. Negotiating is normal.
Watch the whole page when they make a change. A lower fee in one box can return as a higher fee in another. Choose the loan that fits how long you expect to keep it and how much cash you need to protect. The best loan is not the one with the smallest number in the ad. It is the one whose full cost you understand.