How Do I Compare Mortgage Quotes With Different Rates, Points and Fees?

Compare mortgage quotes by asking every lender for an official Loan Estimate on the same day, for the same loan type, loan amount and down payment. Then line up the rate, the monthly payment, the upfront costs, and the five-year cost of the loan. The lowest rate isn't always the cheapest loan.

If you've ever looked at two quotes and thought, "How is one lower on the rate but higher on the cash I need?", you're not alone. Lenders package rate, points, and fees differently, so a quick phone quote won't tell you much.

Step 1: Get apples-to-apples quotes

The Consumer Financial Protection Bureau suggests asking at least three lenders for a Loan Estimate, which is a standard form that lenders must send within three business days of your application (CFPB). Because the form looks the same from every lender, it's built for side-by-side comparison.

To keep it fair:

• Use the same loan type (conventional, FHA, VA) and the same term, like 30-year fixed.
• Use the same purchase price and down payment.
• Try to get them on the same day. Rates move daily, so a gap between two lenders can just be the market changing.
• Ask whether each quote includes points or lender credits.

Step 2: Check the monthly payment

Look at the principal and interest, any monthly mortgage insurance, and the estimated total monthly payment with taxes and homeowners insurance. Make sure the tax and insurance estimates are close to each other. If one lender guessed low, that quote will look cheaper than it really is.

Step 3: Compare upfront costs

On page 2 of the Loan Estimate, the CFPB says to focus on the costs that actually differ by lender: the origination charges in Section A, the services in Section B, and any lender credits in Section J. Section C covers services you can shop for no matter which lender you pick, like title services.

Also check "cash to close" near the bottom of the page. That's the real number you'll need in the bank.

Step 4: Understand points and credits

A point is an upfront fee that can lower your rate. A lender credit works the other way: you take a slightly higher rate and the lender covers part of your closing costs. Neither is good or bad. It depends on how long you'll keep the loan.

Here's a simple way to think about it. If you pay extra now for a lower rate, you need to stay in the loan long enough for the monthly savings to make up the cost. If you might move or refinance in a few years, paying for a lower rate may not pay off.

Step 5: Use the five-year number

Page 3 of the Loan Estimate has a "Comparisons" section. The CFPB explains that you can take the "In 5 years" total you'd have paid, subtract the principal you'd have paid off, and get your five-year cost of borrowing. It also notes the APR and Total Interest Percentage show costs over the whole loan term. A low APR can still hide high upfront costs, so check both.

What to watch out for

• Quotes that aren't on the official Loan Estimate form.
• Rates that assume a credit score or down payment you don't have.
• Big differences in the tax and insurance estimates.
• Pressure to lock or choose right now before you've seen the other quotes.

Shopping won't wreck your credit the way people fear

Many buyers worry that asking several lenders will hurt their score. Many credit scoring models count multiple mortgage inquiries made close together as one, but the details vary by model. Ask your lender how it works for you, and try to do your shopping within a short stretch of time.

Not sure how to read your quotes?

I'm happy to look at your Loan Estimates with you and point out what to compare. Book a 15-minute call, or see my buyer resources. You can also contact me with questions. You're free to use any lender you choose.

FAQ

Is the lowest interest rate always the best mortgage?

No. A lower rate can come with points or higher fees. Compare the rate, upfront costs, cash to close, and the five-year cost together.

What is a Loan Estimate?

It's a standard three-page form from a lender showing your loan terms, projected payments, and closing costs. Lenders must provide it after you apply, so you can compare offers.

How many lenders should I get quotes from?

The CFPB suggests at least three. Even two quotes can show you whether one offer is out of line.

Should I pay points to lower my rate?

It depends on how long you expect to keep the loan. Paying points usually makes more sense if you'll hold the loan for many years.

Can I negotiate with a lender?

You can. Showing a lender a competing Loan Estimate gives you a reason to ask them to review their fees or rate.