Comparing Mortgage Offers?
March 29, 2021 12:44 PM Subscribe
Do you know of any resources to help compare mortgage offers? For instance, Lender A quotes interest rate X, origination fee of Y, and points of Z. How to compare that with the offer from Lender B?
Lender C has the lowest interest rate. It also has the highest points, but that is still affordable, and something we could probably pay up front. That seems best, but I'm not sure.
Lender C has the lowest interest rate. It also has the highest points, but that is still affordable, and something we could probably pay up front. That seems best, but I'm not sure.
Best answer: I'm doing this right now (like, literally, taking a break from it right now), and have been using this refinance calculator from the mortgage professor website. They have a few additional calculators (including for non-refi situations) listed here. The nice thing about their calculators is that you can put in different assumptions both about how long you'll be in the house and what your return on investment would be otherwise (e.g. if you took the higher rate and instead invested the upfront money you'd spend on points), which can be decisive in these comparisons.
posted by matildatakesovertheworld at 12:55 PM on March 29, 2021 [2 favorites]
posted by matildatakesovertheworld at 12:55 PM on March 29, 2021 [2 favorites]
The loan disclosure document should list all costs including loan original fees/title/appraisal, and points, including a summary of out of pocket costs.
As for the optimal points/monthly payment, this is a pretty good guide:
https://www.nerdwallet.com/article/mortgages/should-i-buy-points-mortgage-calculator
I generally don't buy points unless the I can recoup the savings in lower monthly cost over ~3 years.
posted by wongcorgi at 1:04 PM on March 29, 2021
As for the optimal points/monthly payment, this is a pretty good guide:
https://www.nerdwallet.com/article/mortgages/should-i-buy-points-mortgage-calculator
I generally don't buy points unless the I can recoup the savings in lower monthly cost over ~3 years.
posted by wongcorgi at 1:04 PM on March 29, 2021
Best answer: You don't say where you are, but assuming you're in this US...
It's basically impossible to do this reliably without the Loan Estimate, which is a standard, regulated document (looks like this) that is designed to make comparisons somewhat easier. In particular, it makes it harder to hide charges in closing costs. Once you have Loan Estimates, you simply (ha!) compare the Estimated Total Monthly Payment and Estimated Cash to Close. Everything else is included in one of these two numbers. Points have an effect on both numbers. Generally speaking points are not a good deal in the present interest rate environment.
Even then, direct comparison gets more complicated if there are variable rates or if the loans have different rules about including property taxes and insurance.
But forget even trying to do this with numbers you've been told over the phone or on a bank website. If you need to do that for some reason then be sure to ask for the "estimated cash to close" as it will appear on the loan estimate. Don't say anything vague (apparently "closing costs" is vague and will be interpreted differently, and you will not be comparing like with like).
posted by caek at 1:04 PM on March 29, 2021 [5 favorites]
It's basically impossible to do this reliably without the Loan Estimate, which is a standard, regulated document (looks like this) that is designed to make comparisons somewhat easier. In particular, it makes it harder to hide charges in closing costs. Once you have Loan Estimates, you simply (ha!) compare the Estimated Total Monthly Payment and Estimated Cash to Close. Everything else is included in one of these two numbers. Points have an effect on both numbers. Generally speaking points are not a good deal in the present interest rate environment.
Even then, direct comparison gets more complicated if there are variable rates or if the loans have different rules about including property taxes and insurance.
But forget even trying to do this with numbers you've been told over the phone or on a bank website. If you need to do that for some reason then be sure to ask for the "estimated cash to close" as it will appear on the loan estimate. Don't say anything vague (apparently "closing costs" is vague and will be interpreted differently, and you will not be comparing like with like).
posted by caek at 1:04 PM on March 29, 2021 [5 favorites]
Look for a wide difference between the advertised rate and the actual APR, which they need to show somewhere. Every hundredth of a point difference means they are burying fees (and their profit) into the principal.
posted by JoeZydeco at 2:48 PM on March 29, 2021
posted by JoeZydeco at 2:48 PM on March 29, 2021
Response by poster: Thank you for all these helpful answers!
posted by NotLost at 6:38 AM on March 30, 2021
posted by NotLost at 6:38 AM on March 30, 2021
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posted by ananci at 12:46 PM on March 29, 2021 [1 favorite]