How to Compare Two Mortgage Loan Estimates

Comparing two mortgage Loan Estimates? Getting a low mortgage rate is important. But the lender offering the lowest interest rate isn’t always offering the best deal.

Two Loan Estimates can show the same loan amount and even the same interest rate while having very different upfront costs.

That’s why you should compare the entire Loan Estimate before deciding which lender to use.

At Oceans Mortgage, we regularly review Loan Estimates for borrowers who already have an offer from a bank, credit union, mortgage company, or another mortgage broker.

Here are the areas we recommend comparing.

1. Start With the Interest Rate

Your interest rate determines how much interest you’ll pay on the money you borrow and directly affects your monthly principal and interest payment.

But don’t stop there.

A lender offering a lower rate may be charging substantially more upfront to get that rate.

That’s why the next item is so important.

2. Check the Discount Points

Look at Section A - Origination Charges on Page 2 of your Loan Estimate.

If you’re paying discount points, you’re paying additional money upfront in exchange for a lower interest rate.

One point equals 1% of the loan amount.

For example, on a $500,000 mortgage:

1 point = $5,000

That doesn’t necessarily mean paying points is bad. Depending on how long you expect to keep the mortgage, paying points may make sense.

The important thing is understanding what you’re paying to obtain the rate.

A 6.00% rate costing $7,500 in points isn’t automatically better than a 6.25% rate with no points.

3. Compare the Lender Fees

This is another area where mortgage offers can look very different.

Review the origination charges on Page 2 of the Loan Estimate.

Depending on the lender, you may see charges such as:

• Origination fees
• Underwriting fees
• Processing fees
• Application fees
• Discount points

Don’t get too caught up in what each lender calls the fees.

Look at the total lender-controlled costs.

One lender may advertise “no origination fee” while charging other lender fees elsewhere.

4. Look for Lender Credits

Lender credits can reduce the amount you need to pay toward closing costs.

But there’s usually a tradeoff.

A lender may provide a credit in exchange for a higher interest rate.

For example, you might have the choice between paying some closing costs yourself and receiving a lower rate, or accepting a slightly higher rate and receiving a lender credit toward those costs.

Neither option is automatically better.

The right choice depends on your situation, how long you expect to keep the mortgage, and how much cash you want to bring to closing.

5. Compare Mortgage Insurance

If your loan requires mortgage insurance, don’t overlook it.

Two lenders could offer similar rates while structuring the mortgage insurance differently.

Compare both the monthly mortgage insurance payment and any upfront mortgage insurance costs.

This can have a meaningful impact on your actual monthly payment.

6. Look at APR, But Don’t Use APR Alone

Your interest rate and APR are not the same thing.

The interest rate primarily reflects the cost of borrowing the money.

APR is a broader measurement that incorporates the interest rate along with certain points, lender fees, and other finance charges.

APR can be useful when comparing similar loans, but it shouldn’t be the only number you consider.

You still need to understand the actual fees, loan structure, monthly payment, and how long you expect to keep the mortgage.

7. Don’t Compare Taxes and Insurance as Lender Costs

This is a common mistake.

Property taxes and homeowners insurance appear on your Loan Estimate, but they’re generally not costs determined by the mortgage lender.

If one lender estimates your homeowners insurance at $150 per month and another estimates $250, that doesn’t necessarily mean the first lender has the better mortgage.

The same applies to property taxes and certain prepaid or escrow amounts.

Focus heavily on the costs the lender actually controls.

8. Make Sure You’re Comparing the Same Loan

This is extremely important.

Before deciding one lender is cheaper, make sure you’re comparing the same:

Loan amount
Loan program
Loan term
Occupancy
Property type
Credit profile
Down payment or equity
Rate-lock period

You should also pay attention to when each quote was issued.

Mortgage pricing can change as financial markets move. Comparing a quote from Monday with another lender’s pricing from Thursday may not tell you which lender was actually more competitive.

Whenever possible, compare competing offers using similar assumptions and pricing from the same day.

The Lowest Rate Isn’t Always the Best Deal

This is probably the biggest takeaway.

Imagine two lenders offering:

Lender A: 6.00% with $8,000 in points and lender fees

Lender B: 6.25% with $1,500 in lender fees

Which one is better?

There isn’t enough information to answer that question based on the rate alone.

You’d want to consider the payment difference, upfront cost difference, how long you expect to keep the mortgage, and how long it would take the monthly savings from the lower rate to recover the additional upfront expense.

That’s why comparing mortgage offers requires looking beyond the headline rate.

Already Have a Loan Estimate? Let Us Review It.

If you’ve already received a Loan Estimate from a bank, credit union, mortgage company, or another lender, Oceans Mortgage can give you a free second opinion.

We’ll review the rate, APR, discount points, lender fees, lender credits, mortgage insurance, and overall loan structure.

If you already have a great deal, we’ll tell you. If we can do better, we’ll show you.

Get Your Free Loan Estimate Review

Visit:

https://compare.oceansmortgage.com

Upload your current Loan Estimate and answer a few quick questions. There is no cost or obligation to have Oceans Mortgage review your offer.

Understanding the Fees Behind Your Mortgage Rate

Your interest rate is only part of the cost of a mortgage. Lenders may charge different origination fees, underwriting fees, and discount points, even when offering the same interest rate.

One of the easiest ways to compare these charges is by reviewing Section A of your Loan Estimate.

Learn more in our guide: Mortgage Lender Fees Explained: Which Closing Costs Can You Negotiate?

Oceans Mortgage
Corona Mortgage, LLC DBA Oceans Mortgage
NMLS #1558823

Loan programs, rates, terms, and availability are subject to borrower qualification and change without notice. This information is for educational purposes and is not a commitment to lend.