10 biggest mortgage mistakes
Some lenders advertise low interest rates but make up for them with high fees.
A big mistake consumers make is being swayed to choose a particular lender based on these abnormally low promotional rates, says broker Michael Mahon, general manager and broker of HER Realtors in Columbus, Ohio.
You need to compare annual percentage rates between mortgage offers to see which one really costs the least.
APR includes the lender’s fees and shows the loan’s true cost.
A $100,000 30-year, fixed-rate loan with an interest rate of 3.85% where the lender charges 2 points, a 1% origination fee and $1,500 in other closing costs has a 4.215% APR.
The same $100,000 loan with an interest rate of 4.05%, no points, a 1% origination fee and $800 in other closing costs has a 4.199% APR.
While the first loan looks cheaper because of its lower interest rate, it not only costs more in the long run, it also requires you to bring more cash to the table.
Lenders are required to disclose APR on a Truth-in-Lending disclosure form. Read it.