What factors should you consider besides the interest rate and loan amount?

1 Loan type

Not all loans are created equal. There are different types of loans, such as conventional, FHA, VA, or USDA, that have different eligibility criteria, down payment requirements, and fees. For example, FHA loans are popular among first-time buyers because they allow a lower credit score and a smaller down payment, but they also come with higher mortgage insurance premiums. You should compare the pros and cons of each loan type and see which one suits your situation and goals.

2 Loan term

The loan term is the length of time you have to repay the loan. Typically, loans are either 15 or 30 years, but there are also other options. The shorter the term, the higher the monthly payment, but the lower the total interest cost. The longer the term, the lower the monthly payment, but the higher the total interest cost. You should consider your budget, income stability, and future plans when choosing the loan term.

3 Closing costs

Closing costs are the fees and charges that you have to pay when you finalize the loan. They can include appraisal, title, origination, escrow, and other fees. Closing costs can vary widely depending on the lender, the loan type, and the location. They can range from 2% to 6% of the loan amount. You should ask for a loan estimate from each lender, which will show you a breakdown of the closing costs and how they affect your monthly payment and cash to close.

4 Points and credits

Points and credits are optional features that can help you lower or raise your interest rate. Points are fees that you pay upfront to reduce your interest rate. Credits are rebates that you receive from the lender to increase your interest rate. The more points you pay, the lower your interest rate, and vice versa. The more credits you receive, the higher your interest rate, and vice versa. You should consider how long you plan to stay in the home and how much you can afford to pay upfront when deciding whether to use points or credits.

5 Lender reputation

Finally, you should also consider the reputation and service of the lender. You want to work with a lender that is trustworthy, responsive, and transparent. You can check online reviews, ratings, and complaints from previous customers to get a sense of how the lender operates. You can also ask for referrals from your real estate agent, friends, or family who have had positive experiences with a lender. You should look for a lender that offers competitive rates and terms, but also provides excellent customer support and guidance throughout the process.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?