Interest Rates

• Check out the interest rate offered by the lending institution -- whether that is a bank, credit union or mortgage lending company -- before agreeing to a mortgage. While it may seem like the best option to choose the mortgage with the lowest interest rate, always read the fine print and fully understand it. Some mortgages are advertised at a seemingly low interest rate, but that special offer usually comes with strings attached. Examine the offer for hidden fees, the repayment terms and the length of the special low introductory rate.
  
  

Fees

• Hidden costs and fees associated with a home mortgage can be the difference between a payment you can afford and eventual foreclosure. Mortgage companies should inform you of any fees associated with the loan. Typically, fees include underwriting fees, broker fees in addition to closing costs, transaction fees and settlement fees. Some fees are paid to the lender upon application for the loan, while others are negotiable. Either way, the lender should provide you with details and amounts for each of the fees, or at least a formula for how the fee is determined if not the actual dollar amount. Inquire with the lender what each fee includes and more information on any that you may not fully understand.
  
  

Private Mortgage Insurance

• Private mortgage insurance is typically required when home buyers have less than 20 percent of the total amount of the home to put down toward the purchase, also known as a down payment. Some lending institutions require only a 5 percent down payment, but will also require private mortgage insurance. PMI is intended to (PMI) protect the lender in the event the home buyer cannot pay the mortgage payment. If your lender requires PMI, inquire about the price of the PMI as well as what your total monthly mortgage payment will be with the PMI included. Some homeowners fail to think about the inclusion of PMI and are surprised with the total payment due.
  
  

Points

• Sometimes called discount points, a point is prepaid interest that equals 1 percent of the total principal of the loan. Traditionally, home buyers may purchase discount points in exchange for a lower interest rate. Points are essentially another fee that can be paid to the lender, and the more points that are purchased, the lower the mortgage interest rate is. Paying for points upfront may save money over the length of the loan. When discussing points with the lender, ask him to use a dollar figure for each point rather than the percentage or the number of points you must purchase to better understand how much you will save.