How do you compare different pre-qualification lenders and their terms and rates?

I strongly disagree with this. If you check your credit, you likely won't be using the same algorithms that a mortgage lender is using. Most lenders have a what-if simulator or Wayfinder tool to give you a good idea of what you need to do to improve your score. And legally, we cannot charge for the service. So you might as well just get your app in and ask your loan officer how to improve your score.

Definitely check your credit score but keep in mind that most of the consumer websites that claim to give you your credit score, the score they have can be quite a bit different than the one the mortgage company receives. That is because they use a different scoring model. Usually a score obtained from something like “credit karma”, the score the mortgage company gets is usually about 30-40 points lower. Whatever score the mortgage company gets doing our pre qualification, that is the score. Doesn’t matter what you get from something else. Those other sites are good for accuracy though, so they are worth checking if not too expensive.

I disagree with this as well. Unless you have a highly unusual or difficult file, most lenders will still approve you if you qualify. We all go off the same federal guidelines. As far as rates, they can be structured in deceiving ways, which is why the APR is extremely important to pay attention to. If Lender A and Lender B both offer a 6.0% interest rate, but lender A has an APR of 6.1% and Lender B has an APR of 6.2%, it means that Lender B is charging more lender fees for the same rate.

Also, if Lender A offers a 6.0%/6.05% APR, but Lender B offers 5.75%/5.95% APR, you might be tempted to choose Lender B because their rate is lower. But luckily, you have the APR. Lender A isn't charging many lender fees for that 6.0% rate (since the APR is only 0.05% higher) but Lender B is charging a lot of lender fees for that 5.75% rate (0.2% higher). Therefore, before you choose lender B, it would be wise to go back to Lender A to see how much it would cost to buy down that 5.75% rate

Definitely look at the rates vs APR. The farther the APR is above the rate, the more cost involved, such as origination fees and discount points. Many don’t realize that the payment difference on an 1/8 or 1/4 is not as much as you think. Paying an extra $3000 or $4000 to get a lower rate is generally not worth it. Especially like now, rates are expected to go lower so the likelihood of refinancing in the near future is pretty good. So don’t pay extra for a lower rate, you will never recover that cost. Most loans last 5-7 years no matter what because they are refinanced, or paid off for whatever reason. I never subscribe to the savings over 30 year example because the loan is not going to last 30 years, almost always.

In addition to paying less interest over the life of the loan, shorter terms also have lower rates. A 15 year term is around 0.5% lower in rate than a 30 year term.

In my experience, it is always wise to consider a shorter term if financially possible. Not only will the loan be paid off more quickly, but the amount of interest paid will be significantly less. It may be a good idea to review amortization schedules for each term to visually recognize the difference 5 years can make in payments.

One thing I've found helpful when comparing the fees and closing costs is comparing only fees charged directly by the bank, such as Origination Fees, Processing Fees, and Closing Fees. Also note if any points were charged. Other fees will include title fees, which will vary by attorney. Any remaining fees, such as credit report and flood monitoring, will be relatively standard regardless of lender.

Service is extremely important. You're about to get into the biggest debt of your life, so it's important to be with a loan officer that communicates how you need to communicate, sets proper expectations, educates you, and ultimately closes the loan. This is why many Realtors won't accept an offer from the big online lenders, because although their rates might be slightly lower than your neighborhood lender, they have a terrible track record of closing late, not communicating, and refusing to fund loans that should absolutely be approved. Always go with a local lender. They have a reputation to maintain in their market for the sake of their future business, and they WILL work harder than an out of state lender.