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Beware of Going After the Lowest Advertised Interest Rates


You can't simply look for the lowest interest rate and expect that this will lead to the biggest savings for your home loan. The problem is that mortgage professionals have so many different levers to play with in your loan that they can promise a low interest rate knowing that they can make up for it somewhere else in your loanÉ meaning you still end up paying too much.

The mortgage brokers and loan officers can throw so many different types of deals at you that it becomes difficult to discern between them. One lender will promise an interest rate without a prepayment penalty, but they pay closing costs while charging you discount points. Another may quote the lowest interest rate and say that you will pay no "out-of-pocket" costs, at all, and conveniently leave out the fact that they will increase the loan balance to cover the charges. How anyone could call a higher loan balance that increases your payments as "not-out-of-pocket" is terrible, but we've found this practice to occur often.

Because there are so many moving targets in a loan, it can become difficult to comparison shop. After you find your property, and after you understand what kind of loan deal you want, get quotes on the exact same loan type, program, closing costs, and prepayment penalty existence, and everything else with your mortgage loan sources.

The advertising prevalent in many newspapers across the country, where ten or more mortgage sources compare their interest rates, is almost meaningless. So many factors go into making one better than another. It's difficult to find that out until you've gone through the process we've recommended. Don't shorten your list of sources too soon simply because of a low interest rate published in the newspaper.

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