The best loan is not always the lowest rate.
When you shop for a home loan, you are doing more than looking for the cheapest number. You are comparing price, structure, lender fees, the type of mortgage, timing, and the person or company responsible for helping you close.
Quick example: lower rate does not always mean better loan.
Assume you have a 780 credit score and plan to put 5% down. Lender A offers an FHA loan at 6.25% with $1,000 in lender fees. Lender B offers a Conventional loan at 6.50% with the same $1,000 in lender fees. At first glance, the FHA loan looks better because the rate is lower.
But that is not the full comparison. With a low-down-payment FHA loan, the monthly mortgage insurance may last for the life of the loan. FHA loans also include an upfront mortgage insurance premium, often called UFMIP, which is commonly 1.75% of the base loan amount and is often added to the loan balance. A Conventional loan may have mortgage insurance too, but it can often be removed later and it won't have the UFMIP adding thousands to your loan balance. Once you factor those items in, the Conventional loan could be the better long-term structure even with the slightly higher rate.
Numbers matter
Interest rate, points, lender fees, monthly payment, and total estimated cash to close all matter. But each one tells only part of the story.
Structure matters
A fixed-rate loan, adjustable-rate loan, FHA loan, Conventional loan, VA loan, or USDA loan may each have different advantages and tradeoffs.
People matter
The lender's ability to close on time, communicate clearly, understand your situation, and navigate problems can carry real value that may not show up on paper.
Keep reading with lifetime access
The rest of this guide shows what to ask every lender, how to use Section A of the Loan Estimate, and worked examples comparing real offers. Get it, plus every member resource, for a one-time $47. No subscription.
Already a member? Log in
