Mortgage Comparison Worksheet
Download REI Grove's mortgage comparison worksheet to compare lenders, loan products, interest rates, fees, estimated payments, PMI, penalties, lock-ins, and closing costs.
Key Takeaways
- A mortgage comparison worksheet helps buyers organize lender and loan details before choosing a mortgage.
- Buyers should compare more than just interest rates, since closing costs, PMI, penalties, escrow, and loan terms affect the cost of a mortgage.
- REI Grove's worksheet covers loan details, interest, payments, fees, PMI, penalties, lock-ins, and closing costs.
- By using this worksheet, buyers can compare mortgage options side by side and choose the lender and loan product that best fits them.
Comparing Your Mortgage Loan Options
Buying a home can be a complex and difficult process. It includes many steps and considerations that first-time buyers may not anticipate. Mortgages are a crucial step in this journey—but with rising rates and many different lenders to choose from, it can be hard to organize your thoughts and compare your options.
It's a good idea to compare at least two different lenders to ensure you're getting the best rate and terms. You'll need a way to remember who offered what along with other intricacies like closing costs or specific penalties for missing your mortgage payments.
REI Grove's mortgage comparison worksheet will help you create an overview summary of each lender and loan you're considering so you can choose the best option for you.
Types of Mortgages
Before you start reaching out to lenders, it's a good idea to be clear about what type of mortgage you want. Do you need a fixed-rate mortgage or an adjustable-rate mortgage? Conventional or government-backed?
Fixed-Rate Mortgages
Fixed-rate mortgages are the most common type of mortgage. The interest rate on this type of loan remains the same for the entire length of the loan. So, if you prefer the security that comes with knowing your rate and monthly payment schedule will not change, you may want to consider a fixed-rate mortgage. If mortgage rates increase, you don't have to worry about your monthly payments becoming unaffordable. If rates drop, however, you can always refinance and take advantage of lower loan rates.
Adjustable-Rate Mortgages
Adjustable-rate mortgages (ARMs) are less common than fixed-rate mortgages, but this type of loan is preferred in some circumstances. Adjustable-rate mortgages have a locked-in mortgage interest rate for a set amount of time, after which the rate fluctuates for the rest of the loan's duration, often based on an index like the Cost of Funds Index (COFI). One advantage of an adjustable-rate mortgage is that the interest rate will typically start lower but has the potential to increase once the lock on your interest rate ends. It's important to keep in mind that many ARMs do have a limit on how much your rate can increase or decrease.
Generally, if you plan on staying in a home for over ten years, a fixed-rate mortgage is the smarter option. If you plan on moving before then, an ARM may be the route to choose.
FHA Loans
Federal Housing Administration (FHA) loans are mortgages that are insured by the federal government. These loans are backed by a lender who is approved by the FHA. For a closer look at how they work, see Essential Information About FHA Loans.
Many low- and middle-income families buy their first homes using FHA loans because they are provided by banks and financial institutions that are already approved, making the loans government-guaranteed and therefore less risky for lenders. The lenders can then take on borrowers that may be less qualified than others.
There are many reasons that someone may be seen as a riskier borrower than others. Private conventional loans generally have strict credit and down payment requirements, barring many young or low-income buyers from being accepted.
One thing to note is that those who choose to take out an FHA loan do have to pay for mortgage insurance. They also have to pay monthly FHA premiums.
Conventional Loans
Conventional loans are private mortgages. These are typically offered by either a bank or credit union.
Conventional loans have higher interest rates that are fixed, and you'll find that the requirements to be accepted for a private, conventional loan are stricter than many other types of mortgages.
Conforming loans are conventional loans that meet the federal dollar limit set by Fannie Mae and Freddie Mac.
Mortgage Types at a Glance
| Mortgage Type | How It Works | What Buyers Should Consider |
|---|---|---|
| Fixed-rate mortgage | The interest rate remains the same for the full loan term. | Monthly payments are more predictable, but buyers may refinance if rates fall. |
| Adjustable-rate mortgage | The interest rate stays fixed for an initial period, then changes periodically. | Initial rates may be lower, but future payments may increase or decrease. |
| FHA loan | A government-insured mortgage offered by an FHA-approved lender. | May be useful for some low- and middle-income buyers, but mortgage insurance and premiums may apply. |
| Conventional loan | A private mortgage typically offered by a bank or credit union. | Requirements may be stricter than some government-backed loan options. |
Comparing Lenders and Loans
For first-time homebuyers, it may seem daunting to inquire about mortgages from lenders. Here are a few questions you should ask a lender while mortgage shopping that you may not have previously thought to ask.
Many unfamiliar mortgage borrowers are unaware of PMI, or private mortgage insurance. Some conventional loans require PMI, and it protects the lender if you default on your loan. After asking whether PMI is required, inquire about what the premium is, or what the duration of your insurance policy would be.
You also may ask about any other additional fees, like whether you would be required to get home/pest inspections, title searches, related state and local taxes, or applicable third-party fees.
It's also a good idea to ask about prepayment penalties, whether there is a lock-in agreement, and what the estimated cash to close would be on the mortgage. For each of these questions, if there is a fee necessary, ask how much the fee is and how long the term of the fee would be.
The more questions you ask, the better prepared you are as a borrower. No one wants to be surprised by additional fees or stipulations you were not aware of prior to borrowing. Keeping track of the answers to these questions on a mortgage worksheet or mortgage comparison tool will help you stay organized and keep your options straight.
What Does the Mortgage Comparison Worksheet Cover?
REI Grove's mortgage comparison worksheet is organized into sections that let buyers compare two lenders and multiple mortgage options side by side. Instead of tracking details across emails, calls, loan estimates, or notes, buyers can keep important mortgage information in one place.
This worksheet includes:
- Loan officer information
- Loan amount, type, term, and down payment
- Estimated monthly payments
- Closing costs and additional fees
- Estimated cost to close
Section 1: Basic Information
The worksheet begins with basic information for each lender and mortgage option. This gives buyers a clear starting point for comparing who offered each loan, how much the loan may cover, and what type of mortgage is being considered.
This section includes:
- Loan officer name
- Phone number
- Loan term, amount, and type
- Minimum down payment
Section 2: Interest
The interest section helps buyers compare more than just the quoted interest rate. A loan with a lower rate may not always be the better option if other costs, points, or APR differences affect the total cost of borrowing.
This section includes:
- Quoted interest rate
- Annual percentage rate (APR)
- Discount points
Section 3: Adjustable-Rate Loan Details
If a buyer is considering an adjustable-rate mortgage, this section gives them a place to track details that could affect future payments. Since ARMs can change after the initial fixed period, these details are especially important to compare before choosing a loan.
This section includes:
- Initial rate
- Duration of initial rate
- Frequency of adjustment
- Rate cap or payment cap
Section 4: Estimated Payments
Estimated payments can show whether a mortgage fits the buyer's monthly budget. This section can also help buyers compare loans that may have similar rates but different taxes, insurance, escrow, or PITI estimates.
This section includes:
- Estimated monthly escrow for taxes, hazard insurance, etc.
- Estimated monthly payment (PITI)
Section 5: Closing Costs
Closing costs can vary significantly from lender to lender. Comparing them side by side can help buyers estimate upfront expenses and identify higher-fee loan options.
This section includes:
- Application and processing fees
- Origination or underwriting fees
- Attorney and title fees
- Appraisal and credit report fees
- Escrow and recording fees
- Broker, wire, and funding fees
- Other closing costs
Section 6: Additional Fees
In addition to closing costs, the worksheet gives buyers space to compare additional fees that may apply before or during the loan process. These fees may vary based on property, location, lender, or loan type.
This section includes:
- Prepaid interest
- Third-party fees
- Title search
- State and local taxes
Section 7: Private Mortgage Insurance
Many unfamiliar mortgage borrowers are unaware of PMI, or private mortgage insurance. Some conventional loans require PMI, and it protects the lender if you default on your loan. After asking whether PMI is required, inquire about what the premium is, or what the duration of your insurance policy would be. See our guide on PITI, PMI, and rate locks for more detail.
This section includes:
- Whether PMI is required
- PMI premium
- PMI duration
Section 8: Prepayment Penalties
It's also a good idea to ask about prepayment penalties, whether there is a lock-in agreement, and what the estimated cash to close would be on the mortgage. For each of these questions, if there is a fee necessary, ask how much the fee is and how long the term of the fee would be.
The worksheet gives buyers space to compare prepayment penalties across mortgage options. This can matter if the buyer plans to pay off the loan early, refinance, sell the home, or make extra payments toward principal.
This section includes:
- Whether there is a prepayment penalty
- How much it is
- How long the penalty period lasts
Section 9: Lock-Ins
Lock-in agreements can affect whether a buyer's quoted rate remains available for a certain period. If a rate lock is offered, buyers should understand the fee, term, and any conditions attached to that agreement.
This section includes:
- Whether there is a lock-in agreement
- Lock-in fee
- Lock-in term
Section 10: Estimated Cost to Close
The estimated cost to close section gives buyers a place to compare the total cash needed to finalize each mortgage option. This can be useful because two loans with similar monthly payments may have very different upfront costs.
Benefits of Professional Support
Professionals like mortgage brokers or HUD-certified housing counselors are trained to offer advice and help you make sound financial decisions when buying your new home.
These professionals can help you improve your credit, give you personalized recommendations on neighborhoods or housing types, and help you determine if you're ready to purchase a home. They can help guide you on what your options are for your down payment, realtors, and mortgage types.
Seeking professional advice can help you find potential lenders and loan offers to research further. Tools like our mortgage comparison worksheet or a mortgage calculator can also help you save money and make a more informed decision. Though professionals and tools can assist you in finding good lenders to choose from, it's ultimately up to you to decide which home loan option to go with, based on your personal situation and needs.
Conclusion
If you aren't familiar with any of the terms in our mortgage worksheet, continue with your own research into the mortgage lending process or contact a real estate professional to help you navigate them. REI Grove's worksheet will help you gain a bird's-eye view of your options, allowing you to realize what strengths and pitfalls each one may have. You'll more easily see which lender and mortgage fits your specific needs for the loan amount you require.
FAQs
What is a mortgage comparison worksheet?
A mortgage comparison worksheet is a tool buyers can use to compare lenders, loan products, interest rates, fees, estimated payments, and other costs side by side.
Why should buyers compare mortgage lenders?
Buyers should compare mortgage lenders because different lenders may offer different rates, terms, fees, closing costs, and loan products.
How many lenders should buyers compare?
Buyers should compare at least two different lenders to see which option offers the best rate and terms for their needs.
What does the mortgage comparison worksheet include?
The mortgage comparison worksheet includes sections for basic information, interest, adjustable-rate loan details, estimated payments, closing costs, and additional fees.
What mortgage details should buyers compare first?
Buyers may want to start by comparing loan amount, loan type, loan term, minimum down payment, quoted interest rate, APR, and estimated monthly payment.
Why should buyers compare APR and interest rate?
Buyers should compare APR and interest rate because the interest rate affects the monthly payment while APR reflects broader borrowing costs. Comparing both gives a clearer view of the loan's total cost.
What is PMI?
PMI, or private mortgage insurance, is insurance that protects the lender if the borrower defaults on the loan. Some conventional loans require it.
What are prepayment penalties?
Prepayment penalties are fees that may apply if a borrower pays off the mortgage early, refinances, sells the home, or makes extra payments during a penalty period.
What is a mortgage lock-in agreement?
A mortgage lock-in agreement holds a quoted rate or terms for a specific period. Buyers should ask whether a lock-in fee applies and how long the lock-in term lasts.