Home buyers sometimes overlook one important step that can save thousands of dollars shopping for the right lender.
Ask each lender the following questions.
RATES
1. What is the interest rate and annual percentage rate of the loan?
  Find out what the interest rate will be on the loan as well as the annual percentage rate (APR). The APR is a combination of the interest rate, points and other charges divided by the loan's term to give an annualized rate. It is the best way to compare loan costs. Lenders are required by law to release the APR to you.
Remember: The lowest interest rate is not necessarily the best .

POINTS
2. How many points will be charged?
   A point is 1% of the loan amount. The number of points charged varies from lender to lender. Discount points like mortgage interest are tax-deductible by the buyer, should you pay points.

FEES
3. What is the total cost of the fees charged?
  Lenders charge fees for such items as application, origination, document preparation, document review, underwriting, tax service. Some lenders combine all of the costs and charge one basic fee. Others charge separately for each fee.
Remember: We will tell you up front what fees are charged and what is included. We like to have clarity from the beginning, so there are no misunderstandings later.

PMI
4. Can I finance the upfront Private Mortgage Insurance (PMI) premium into the loan amount?
  If your down payment is less than 20% of the sale price, you will be charged PMI, an insurance policy to protect the lender in case you default on the loan. There are financing options to avoid PMI which allows you to put less than 20% down. We will be happy to help you understand the wide variety of loans available today.

PREPAYMENT
5. Is there a prepayment penalty?
  Normally, you can prepay a loan without penalty if you notify the lender in writing that you are either selling the home or refinancing the loan. In many areas, prepayment penalties are no longer allowed.

REPUTATION
6. What is the lender's track record?
  It's important to rate your lender's reputation. You want a lender who will keep you informed and be able to answer questions promptly throughout the financing period.

 
Should You Pay Points?
  Paying no points is an option. It is certainly possible to take out a mortgage without paying points. In fact, many borrowers opt to do so if the yare short of cash for their home purchase or they don't expert to own the home for long.

 Paying Points Without Cash
  Finance the points. If you think paying points is a sound choice but you are short of cash, you may be able to roll the points into your mortgage loan. Using our first  example, you would finance $103,000 (instead of $100,000) at the 7% rate. Doing so would increase your mortgage cost per year by $240, compared with paying cash for the points at settlement. Note, however, that financing the points through your mortgage would cost $168 less per year than if you did not pay points and took the higher 7.5% rate.

HOW TO COMPARE LOANS
 The best way to compare the true cost of a loan is to focus on the Annual Percentage Rate (APR). The APR includes not just the interest rate, but also points, fees and other credit costs. Thus, it is often higher than the loan's stated interest rate. The law requires lenders to tell you the APR in a Truth-In-Lending statement within three days of your loan application.