Mortgage Costs: What to Look For

What are the first things that come to mind when considering a mortgage loan?

If you’re like many, it‘s the interest rate followed by the closing costs.

Therefore, you may be surprised to know that neither of these are accurate indicators of what your new mortgage loan will cost.

Now, interest rates and closing costs are important. However, it is not suggested that you make a decision on which lender to do business with based solely on the interest rate and/or associated fees you are quoted. Those who do often find themselves frustrated with the loan process and may end up disappointed in the end.

Here’s why…
All mortgage banks offer very similar products that are very similarly priced. So what you should find, while shopping for a mortgage, is that the interest rates and closing costs will be very closely aligned from one lender to the next. Will there be differences? Yes. But these differences should not be material in nature and, when considering the entire financing experience, are nominal.

Here are some key things to consider about mortgage costs when you’re looking for a loan.

Shop around…
The Loan Advisor you work with should take time to understand your short and long term financial goals. If you are offered loan options with interest rates and/or closing costs that are far below (or far above) that of other lenders, you should be concerned. Don’t risk being faced with unexpected surprises. Do some research before seriously considering options that seem too good to be true.

Stay focused…
Work with a reputable business you feel comfortable with. Know what you want to accomplish and take time to look at online reviews and ratings. Be sure that the loan options offered are structured to align with your individual goals. Only proceed with a mortgage lender that is competitively priced and will deliver what they promise.

Understand costs…
The true driver in the cost of any mortgage loan is the term—otherwise known as the total number of payments. This is calculated by taking your principle and interest payment times the total number of months of your mortgage loan.

(Principle +Interest) * Total Months = Total Payments

Here’s some advice…
Never decide to apply for a mortgage loan solely based on interest rates and/or closing costs!  As your budget allows, choose the shortest mortgage term available. In the long run, it will put more money back into your pocket.