How to Determine Best Mortgage Rate With & Without Points
- 1). Ask each lender you are shopping for rates to provide you with a Truth-In-Lending Statement and a Good Faith Estimate along with its best interest rate. The Truth-in-Lending Statement is required by law to calculate the APR for the loan with exactly the same calculation as every other lender in the country. The Good Faith Estimate simply outlines the fees charged on the loan.
- 2). Look at each Truth in Lending Statement. In a box in the top left-hand corner will be the APR for the loan. The lowest APR is the lowest overall priced loan. The APR takes into consideration the monthly interest rate charged on the loan, as well as all of the fees associated with the loan. If there is a significant difference in the APRs of the loans, one is probably charging the borrower points (a point is a fee to lower the interest rate). Additionally, the last box at the top of the page will show the borrower how much will be spent on mortgage, including interest, over the life of the loan. This can futher help the borrower determine the cheapest overall loan.
- 3). Look at each Good Faith Estimate to compare closing costs. The Good Faith Estimate might vary from lender to lender, but the closing costs should be pretty comparable, within $500 or so of each other. If not, one is charging you larger fees or one has left out taxes and insurance. If two companies have APRs that are identical or close to identical, this form helps show you where your money will go.
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