Mortgages Made Simple

Step 1: Should You Refinance?
Step 2: Choosing a New Mortgage
Step 3: Comparing Rates and Costs
Step 4: The Closing Process

Comparing Rates and Costs

The total expense for getting a mortgage depends on interest rates, number of points, legal fees and other costs required to obtain the new loan.

Not every financial institution charges the same up-front costs, nor do they all apply the same fee amounts for the various application and processing services. While there are national and local customs for the costs of getting a mortgage, it is wise to investigate the exact costs from several lenders before you commit.

Interest Rate, Annual Percentage Rate (APR), Costs and Fees
Below is a list of the most common financial considerations you should make during the mortgage application process. It’s important to ask your lender about each of these costs and accurately calculate their total before making a final decision.

Interest Rate:
The cost of borrowing money. The interest rate is the note rate and is different from the Annual Percentage Rate (APR), which is defined below. You should research current interest rates carefully; it could save you thousands of dollars. The Internet is a convenient way to research interest rates from many lenders at once. Our site includes an Interest Rate Calculator. Of course, interest rates are not the only gauge you should consider. Other factors, such as service, experience and company stability, are important elements in selecting a lender.

Annual Percentage Rate (APR):
The charge for using an amount of money for a specified time expressed as an annual rate. The APR is calculated for the term of the loan and includes the interest rate, points, and certain other costs.

Title Search:
An examination of public records, laws and court decisions to ensure that no one except the seller has a valid claim to the property, and to disclose past and current facts regarding ownership of the subject property.

Title Insurance:
Insurance which protects the insured against any loss caused by defect of title to real estate, wherein the insured has interest as purchaser, lender or otherwise.

Application Fee:
Fee charged by a lender at the time of loan application. It typically covers the cost of an appraisal, credit report, lock-in fee or other closing costs that are incurred during the process or the fee may be in addition to other charges.

Appraisal Fee:
The fee charged for an appraisal from a licensed appraiser who is required to give an opinion or estimate the current value of the home you want to buy or refinance.

Loan discount points are a one-time charge assessed at closing by the lender to increase the yield on the mortgage loan to compete with other types of investments. One point equals 1% of the principal amount. In many instances, you can reduce the interest rate on your loan by paying points upfront against your loan.

Closing Costs:
The costs that are incurred in order to purchase real estate. These may include points, taxes, settlement agent fees and more.