How to Compare Mortgage Lenders Side by Side

What has to match before the numbers mean anything?

The loan scenario has to match, or the cheaper-looking offer may be a different product. Start there, then read rates.

Line up purchase or refinance, occupancy, property type, zip code, price or value, loan amount, and down payment. Ask which credit score was used. A quote built on a higher score than you have is not your quote. Also match the term, and whether the rate is fixed or adjustable.

The CFPB says the interest rate is on page 1 of the Loan Estimate and the APR is on page 3. That explanation is in the interest rate and APR answer. Lenders generally must send a Loan Estimate no later than the third business day after you apply. The official walkthrough is the Loan Estimate page. A worksheet from before you apply can omit fees the form would show.

An application is your name, income, Social Security number, property address, an estimated value, and the loan amount sought. After that, the Loan Estimate clock runs. You can apply with more than one lender in the same week. Hold off on new car loans and new cards while you shop.

How is the note rate different from the APR?

The note rate is the yearly cost of borrowing the principal. It does not include fees. The APR is a wider measure, and it is usually higher than the note rate.

The CFPB says the APR reflects the interest rate, points, mortgage broker fees, and other charges you pay to get the loan. Monthly principal and interest is calculated from the note rate, not from the APR. Comparing only APRs can hide the payment. Comparing only note rates can hide cash due at closing.

APR math assumes you keep the loan for the full term. Points look cheaper in that math if you stay for many years. Page 3 includes an "in 5 years" figure you can set next to your own timeline.

The CFPB warns that an ARM's APR does not reflect the maximum rate, and that an ARM APR and a fixed-rate APR are a shaky pair. Compare fixed loans with fixed loans when you want a clean read. If an offer is an ARM, read the adjustment caps.

What are points and lender credits?

Points are prepaid interest. Lender credits run the other way. The CFPB's points answer defines one discount point as 1 percent of the loan amount. On that example, one point on a $100,000 loan is $1,000.

Paying points lowers the note rate compared with a zero-point loan from the same lender on the same product. Points on the Loan Estimate must be tied to that lower rate.

Lender credits reduce cash at closing and raise the interest rate. You pay for the credit over time, for as long as you keep that higher rate.

Ask each lender for a zero-point quote and, if you want it, a quote with points, at the same lock length. Then you are not comparing a rate that includes points with a rate that does not. The guide to comparing mortgage offers, points, and APR stays on that tradeoff.

Which fees belong in the comparison?

Compare the lender's own charges first. Some third-party fees are still estimates you can shop.

On page 2, Section A lists origination charges, including discount points. Add that section rather than matching fee names. A lower rate with a much higher Section A total is not automatically cheaper.

Services you cannot shop follow the lender's provider. Services you can shop, such as title work on many purchases, change with the company. Also read cash to close on page 1. It combines the down payment, costs, credits, and tax and insurance deposits. Two loans with the same rate can still demand different checks.

What does the lock period tell you?

The lock period is how many days a quoted price is set to last if you and the lender lock it. It is a comparison field, not a promise of approval and not a promise the loan will close on those terms.

Ask whether the quote assumes 30 days, 60 days, or another length. A longer lock can cost more, because the lender holds a price while the bond market can keep moving. A lock that expires before the contract date is a different product from one that covers that date.

If closing slips, the lender may reprice the loan or charge for an extension. If the appraisal, credit, occupancy, or loan type changes, the lender can reprice inside the lock. Some agreements offer a one-time float-down, often for a fee. Many do not. A floating rate is not a lock. HomeMortgageOnline does not lock rates.

How do you read two Loan Estimates together?

Walk the same boxes in the same order, and write the answers down.

1. Page 1: loan type, term, purpose, and whether the rate can change.
2. Page 1: interest rate, monthly principal and interest, and cash to close.
3. Page 2: Section A, including points or credits.
4. Page 3: APR, total interest percentage, and the cost in 5 years.
5. The lock confirmation: days, expiration, and what voids the price.

If the APR is lower and cash to close is higher, look for points. If one form is an ARM, read the caps before you treat the APRs as twins. Confirm the lock length on the form, not on a later phone quote.

The points and APR guide goes further on that tradeoff. The payment calculator on HomeMortgageOnline can turn a note rate you already have into principal and interest. The site does not lend.

Disclaimer: this guide is for general education. HomeMortgageOnline is not a lender, broker, or loan originator. It does not take applications, lock rates, or give financial advice. Real offers vary by credit, down payment, loan type, points, fees, and market conditions.

Sources

1. interest rate and APR answer - https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-mortgage-interest-rate-and-an-apr-en-135/
2. Loan Estimate page - https://www.consumerfinance.gov/owning-a-home/loan-estimate/
3. CFPB's points answer - https://www.consumerfinance.gov/ask-cfpb/how-should-i-use-lender-credits-and-points-also-called-discount-points-en-136/