The most common decisions that will need to be made are:
Loan Term (for example, 15-year or 30-year)
Loan Type (for example, conventional, FHA, or VA)
If you’re considering a low-down payment conventional loan, there are also private mortgage insurance options to consider. If you’re not sure what the cost difference might be between two or three kinds of loans, ask your Utah mortgage broker to give you detailed worksheets for each choice, and compare them side by side.
Lender credits are rebates from the mortgage broker or mortgage lender that will offset your closing costs. Points, also known as discount points, are upfront charges you pay to the lender in exchange for a lower interest rate.
Learn more about how points and credits work, and how to decide which is right for you.
If you’reconsidering a loan with either points or credits, have your mortgage company show you comparisons — one with points or credits, and one without. Comparing the two options side by side is the best way to figure out which is better for your situation. Compare how much cash you need to have at closing, the monthly payment, and how much interest you will pay over the time period you expect to own your new home.
A Loan Estimate is a standardized form that lets you compare costs across different mortgage companies and loan programs. It’s a good idea to know what kind of loan you want before you request Loan Estimates. That way, you'll be able to see the same loan programs with different mortgage brokers, and you can compare them to see which is the best deal.
When comparing two potential loan products, it’s a good idea to consider the shortest and the longest amount of time you can see yourself keeping the loan. For example, whether you should pay closing costs upfront or use lender credits to reduce your closing costs depends on your timeframe. And an adjustable rate mortgage may start with a lower monthly payment but can be risky if you keep the loan after the initial interest rate expires.
Figure out what's the shortest, most likely, and the longest number of years you expect to keep the loan.
Ask loan officers to help you calculate out the total costs of a loan over each of your timeframes.
Think beyond the monthly payment. It’s important to make sure that you can afford the monthly payment for the loan amount and type of loan that you are considering. But it’s also important to consider the amount of risk you are taking on (for example, with an adjustable rate mortgage your interest rate and monthly payment may go up) and the overall cost of the loan. Some kinds of loans may have a lower monthly payment, but a higher cost overall. Ask yourself which matters more to you.
Don’t count on being able to refinance. Refinancing can often be beneficial for mortgage borrowers. However, refinancing is never guaranteed. If changes in the local economy lower your income or your home value, you may not be able to refinance your current mortgage loan. And if rates rise in the future, there may not be any benefit to refinancing.