There are almost as many Mortgage Lenders as there are Borrowers. With the explosion in the housing market, many have jumped into the mortgage market.You do not have to be a big financial institution to lend money on a mortgage. You only have to apply and have enough capital in some states to qualify to lend money . Most states do require lenders to be licensed in their state to lend money on mortgages so be sure that you inquire about the lenders license before you get involved.
    
And because there are so many lenders ready to lend you their funds, you need to have a means of COMPARING them so that you are sure to get the best possible mortgage suited to your individual needs and situation.And, because there are also so very many charges and costs involved in applying and getting a mortgage loan, you need again to be able to COMPARE the different mortgage offerings you will be able to acquire from as many lenders as you have time to obtain. Remember also that you can use a Mortgage "Broker" to aid you in your quest since they have access to many different lenders with different programs and rates. However, you will undoubtable have to pay a Mortgage Broker "Fee" for their services which may very well be worth it if they can find you the lowest interest rate and lowest costs.
    
Because there are so many lenders in the market today and because housing starts are very brisk, you are bombarded with ads on TV, the radio and newsprint how one lender will charge you "No Closing Costs", or another just $295 in Closing Cost...How can they do that when there are actual and real expenses involved with a mortgage that have to be paid by someone. Usually they do it in the Interest Rate. So, we need to be able to COMPARE each mortgage offering we get so that we can determine which one cost us the most when we add up the closing costs, any other fees and the interest costs.
    
The purpose of this page is to aid you in COMPARING all the mortgage offerings you have obtained either directly from a Lender or from a Mortgage"Broker". Here are the steps necessary to make an informed decision.
    
Step #1
Assuming you have decided on a "Fixed" or "Adjustable"Interest Rate Mortgage, we will examine how to COMPARE a "Fixed"Rate Mortgage first. We also assume that you have decided on a Mortgage "Term" in years and we will use a 30 year in our example here. What you therefore need to ask the Lender or Broker for is a QUOTE on a Mortgage with a face amount of ($ Amount you need) for 30 Years with "Discount Points" of (Number of points you want. Remember each discount point lowers the interest rate on the loan) and that you expect to put down ( 20% if possible,as most lenders will not loan more than 80% of the purchase price,or will raise the interest rate if they loan a higher amount in relationship to the purchase price).
      
Step #2
When you receive the interest rate QUOTE, ask how many "Discount Points"are involved and if the amount is 80% of the purchase price of the home or less.( Which means you have to come up with more than 20% down payment).
    
Step #3
Ask also if there are any "Mortgage Broker" Fees involved and how much they are.
    
Step #4
And finally, when you are satisfied with the quotes you obtain, ask the lender or broker to supply you with a "Good Faith Estimate" HUD Statement that will list every cost estimate that the lender expects to charge you in connection with the loan. You will probably find that the lender or broker is not interested in going to this extent unless they feel you are really interested in their program. However,this is YOUR life and YOUR money involved so you have the right to ask for whatever you need to make an informed decision. If they are reluctant, then move on to another lender or broker.

Now we are armed with enough information to plug into a spreadsheet to COMPARE each lender to find the best loan for our particular situation. Here are 5 Examples from 5 different lenders to show just how each lender's offer is different and how that difference effects the true cost to us. These are only examples and not reflective of current interest rates or costs:
     

  
(a) "Closing Costs" are listed on the "Good Faith Estimate" HUD statement supplied by the lender. We divide these costs into 3 sections so that we can make comparisons between the lenders. The first section is called "Discount Points" and is the amount in line # 802 on the "Good Faith Estimate". We separate this out of the Estimate because the lender should lower the interest rate on the loan for every "Discount Point" charged the borrower. Therefore, we list the "Discount Points" here to make sure we get the lower interest rate. The second section is called "Broker Fee" and is the amount in line # 808 on the "Good Faith Estimate". If you do NOT use a Mortgage Broker for this loan, then there should be NO amount in this line. If there is an amount listed here, ask the lender who it is going to and why. The last section is all the remaining cost on the "Good Faith Estimate" EXCLUDING the amounts on line #802 & #808.
    
(b) This lender is adding the "Closing Costs" to the Principal Amount of the loan instead of asking the borrower to pay it up front. In this case the "Closing Costs" amount to $4,000 which you can see is added to the Principal Amount of the Loan.
    
(c) This column is the amount of Interest you pay at each monthly payment since that is what the loan is actually costing you. The principal portion lowers your loan balance, thereby building up your equity in your home.
   
(d) End Yr 1 payment  Includes the "Up Front" costs.
     
    

Step #5
Now we can review the results of our computations and comparisons to see that the"No Closing Cost, No Broker Fee and No Discount Points"works out to be the lowest cost to us for the first 5 years of the loan, even with the higher interest rate and adding the Closing Costs into the Principal Amount. However, if we live in this home for over 5 years then the other loans with the lower interest rate and higher up front costs starts to work out to be less expensive.Therefore,expecting to live in a home for longer periods of time, in this case over 5 years, makes the lower interest rate loan less expensive,while expectations of staying for shorter periods of time, under 5 years, points to the higher interest rate, lower or no closing cost, fee, or discount points loan as the better option