The Voice for Local Real Estate


Comparing Loan Costs

Comparing APRs may be an effective way to shop for a loan. However, you must compare similar loan products for the same loan amount. For example, compare two 30-year fixed rate loans for $100,000. Loan A with an APR of 8.35% is less costly than Loan B with an APR of 8.65% over the loan term. However, before you decide on a loan, you also should consider the up-front cash you will be required to pay for each of the two loans.

Another effective shopping technique is to compare identical loans with different up-front points and other fees. For example, if you are offered two 30-year fixed rate loans for $100,000 and at 8%, the monthly payments are the same, but the up-front costs are different:

Loan A - 2 points ($2,000) and lender required costs of $1,800 = $3,800 in costs.
Loan B - 2 1/4 points ($2,250) and lender required costs of $1,200 = $3,450 in costs.

A comparison of the up-front costs shows Loan B requires $350 less in up-front cash than Loan A. However, your individual situation (how long you plan to stay in your home) and your tax situation (points can usually be deducted for the tax year that you purchase a home) may affect your choice of loans.

To compare loan costs for yourself, use the following chart. If you don’t understand the terms, click here for the definitions.

Comparing Mortgages

Use this chart to help you to find the best mortgage. If you don't understand one of the questions, refer to the cheat sheet.

 

Lender A

Lender B

Lender C

Lender

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Loan Officer Name

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Phone Number

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Loan Product Name

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What are the monthly payments?

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What is the Annual Percentage Rate (APR)?

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What is the interest rate?

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Will the interest rate change?

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When?

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How often?

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By how much?

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How many years will you have to repay the loan?

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Is there a balloon payment?

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What will you have to pay in points?

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What will you have to pay in fees (closing costs)?

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Application or loan processing fee

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Credit report

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Origination or underwriting fee

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Lender or funding fee

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Document preparation and recording fees

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Insurance fee

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Attorney fee

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Taxes

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Title search/title insurance

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Broker fees

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Survey fee

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Flood certification fee

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Other fees

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Cost of insurance

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Are any of the application fees refundable if you don't get the loan?

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If you use a broker, how much will he or she be paid?

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What is the penalty for late or missed payments?

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What is the penalty if you pay off or refinance the loan early?

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What is the minimum down payment required?

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Can you afford this loan?

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ONLINE RESOURCES

Use the Fannie Mae True Cost Calculator to compare different types of loans in terms of monthly payments, tax implications, closing costs and other fees.

Use the FICO calculator to figure out monthly payments based on the loan amount and interest rate. The calculator also computes the effect of prepayments and the amount of interest paid over the life of the loan.