Shop for a Loan

Compare loan programs and rates offered by several different lenders before you choose a loan. If you find a lender that offers a 7.25 percent rate when all the others charge one-quarter point more, you'll save $6120 in interest over the life of a 30-year, $100,000 fixed-rate mortgage. Understanding the tradeoffs can help you choose a loan wisely.

To be sure you compare loans thoroughly:

• Compare three to five different lenders or mortgage brokers.
  One of them is bound to offer the loan that's best for you.
• Don't focus solely on the interest rate.
  Getting a low rate is important, but you may not benefit from it if you have to pay too many up-front points and other fees.
• Understand the relationship between points and rates.
  A point is prepaid interest, and each point you pay equals one percent of your loan amount. If you get a $100,000 loan and pay two points, that's $2,000 in points. The more points you pay, the lower the rate you'll get.
• Think about how long you'll keep the loan.
  If you're going to move in a few years, consider an adjustable-rate mortgage since you may be able to sell the house before the rate gets too high. If you plan to stay longer, a fixed-rate mortgage may be an attractive option because your rate stays fixed for the term of the loan.