Choosing a lender
In the end, what you want in a lender is quality, not necessarily the bottom rate. While you're perusing the aisles of mortgage lenders, think of these points:
Fantastic rates spell trouble. Lenders offering fantastic rates may have just set up shop to take advantage of the refinance market. If local REALTOR® do not recognize them, then they may not be in business later when you need them. Fantastic rates also usually mean excessive fees and other hidden costs. Do not first shop for a loan based on rates and fees; first meet with lenders to find out what the best financing source for you is -- FHA, VA, FNMA or FHLMC. And if you are told you can get a significantly lower rate from a lender, that lender is probably a "bait-and-switch" artist. You will not actually be able to get that rate. Run fast. Experienced and reliable lenders should be able to tell you at the time of your application whether your loan will be approved. Do not find yourself in the position of finding out weeks after the application was taken -- and you've paid fees -- that your loan was denied. Your estimate should closely mirror final loan documents. If the difference is significantly higher, ask an attorney to review the papers. You shouldn't have to pay more fees than you were quoted. At the time of application, get in writing the lender's policy regarding the locking in of rates and fees.
Because there are so many consumer loans on the market and so many different structures of rates and fees, you need an experienced professional to help you determine which the best is for you. They should ask whether you expect to be in your new home longer than five years; whether you want to pay off your loan or lower your payments; whether your income is fixed, stable or will be increasing; what the best tax strategy is for your individual situation. If the loan officer doesn't ask all of the above, that officer most likely doesn't have the experience necessary to furnish you with a professional mortgage consultation. Regarding discount fees: They are to be prepaid interest charges. The lower the loan fee, the higher the interest rate. A mortgage lender who raises the interest rate can then "pay" your closing costs. Doing so can amount to thousands of dollars, increase your loan amount to more than you need, and, cost you additional thousands in interest over the life of your mortgage. Factor that into any lower rate scenario you're considering.
Ask the lender for examples of the loan program selected. The examples should show totals of payments, totals of interest rates paid and loan balances after selected lives of the loan.