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How to Compare Multiple Mortgages So You Can Save the Most Money!
By John R. Blakefield
So you've shopped around and have found numerous possibilities of mortgages that might work for your situation. You've taken into account how much money you want to borrow, perhaps on a specific property you have already picked out or within a price range that you have determined you can afford. You have saved up for a down payment, or have decided to find alternate financing that does not require 20% of the purchase price for a down payment.
There is so much information, in fact, that it can be rather overwhelming. This is when you need to organize and compare the mortgages that you are considering.
As long as you have all the information, terms and fees that are associated with each of the mortgages (which you should, and if you don't, then ask the broker or lender for a detailed itemized list) then you can do a fair analysis and comparison of each. You can do this all on your own and do not need a professional to help you, unless you feel it is really necessary.
You can use a spreadsheet such as Excel or lined paper. On top should be labeled by the lender and his or her information. On the left, going down the side of the paper should be all the fields we are going to talk about when comparing mortgages. You should have as many columns as you for the mortgages you are comparing. So if you have five mortgages, there should be five columns.
Along the left you should have the following items each in a single row. You then will put the information in the correct record. The record corresponds with the information from the specific lender to the item you are inputting.
So what do you include? Start with the type of rate. Is it fixed, adjustable, or balloon? The next items should be the minimum down payment and length of the loan. Are you putting down 20% or 25% of the total purchase price? Is the length of the loan 10, 15, 20, 25 years or more?
The next items will be the interest rate and annual percentage rate. These numbers represent how much interest you will be paying on the money borrowed.
If you are putting down less than 20% of the purchase price to buy the home, you may be asked to pay Private Mortgage Insurance. Include that as an item as well. Also, have an item as to how long you will have to pay this PMI. It can make a huge difference in the amount of money you pay for the entire loan! After that, put an item for the monthly payment of taxes for the escrow and any other insurance that may be involved such as hazard insurance.
The next item should be the total monthly payment you expect to pay based on all these terms. It should already be calculated for you when getting quotes and information from the broker or lender. This sheet is just a way to compare all the information on the different loans.
The following items are all individual, but include all the fees that are associated with the mortgage and closing the deal. The fees are: application fee, loan processing fee, appraisal fee, underwriter fee, lender fee, attorney fees, broker fees, credit report fee, document preparation fee, and all other fees that may have been included with the specific mortgage.
It is amazing how many fees are associated with getting a mortgage. You must include all these numbers to see which mortgage is really the better deal. These expenses must be part of the total cost of the mortgage.
The final items should include title insurance, taxes, any home inspections or surveys, flood determination, and finally, an item for total fees and closing cost. You may want to include any other information below this that is not definite, but part of the mortgage such as prepayment penalties. Although it may not affect your total cost, it is important to know that it could and must be compared to the other mortgages.
Now you have a clear way to look at all the items and terms of the mortgages you have researched so you can make an educated decision on which is best for you. Look at total cost as well as terms and you should be painted a clear picture of your financial future regarding your mortgage.
About the Author
John R Blakefield is a mortgage and real estate specialist. For more information, articles, news, tools and valuable resources on home mortgages or investment loans, refinancing, debt solutions, visit this site: http://www.scourtheweb.com/mortgage/.
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