9 Things to Know Before Getting a Mortgage
The mortgage with the lowest advertised rate is not automatically the cheapest mortgage. The useful comparison starts with the actual loan documents: how much cash you need, what you will pay each month, what the lender is charging, and which terms can change.
Still deciding whether homeownership makes sense right now? Use the Rent vs. Buy Calculator to compare the estimated costs over the same number of years.
Quick Answer
- For mortgages covered by the federal TRID rules, providing six key pieces of information triggers the lender’s obligation to provide a Loan Estimate, generally within three business days.
- Compare the same loan type across lenders and look at the interest rate, APR, points, lender credits, origination charges, monthly payment, and cash to close together.
- One mortgage point equals 1% of the loan amount, but there is no fixed rule that one point reduces the rate by a particular amount.
- A quoted rate is not necessarily locked. Check the Loan Estimate for the lock status and expiration.
- Your real housing cost can include taxes, homeowners insurance, mortgage insurance, HOA dues, and other costs beyond principal and interest.
1. Get actual Loan Estimates before choosing a lender
For a transaction covered by the TRID rule, the lender generally must deliver or mail a Loan Estimate no later than the third business day after receiving an application. For this purpose, an application consists of six pieces of information: your name, income, Social Security number for obtaining a credit report, property address, estimated property value, and requested loan amount.
You do not have to provide pay stubs, W-2s, or a purchase contract merely to trigger the Loan Estimate requirement, although providing accurate supporting information can make the estimate more useful.
Ask multiple lenders to quote the same loan type, term, down payment, and rate-lock assumptions. Otherwise, a side-by-side comparison can be misleading.
2. Do not compare mortgages by interest rate alone
The interest rate determines the interest charged on the loan. APR is a broader annualized measure that incorporates certain finance charges. Neither tells the entire story by itself.
On the Loan Estimate, compare the rate and APR along with origination charges, points, lender credits, projected payment, and cash to close. A loan with a slightly lower rate can require substantially more money upfront.
3. Mortgage points do not have a universal rate reduction
One point equals 1% of the loan amount. On a $400,000 mortgage, one point costs $4,000.
What that $4,000 buys is not standardized. CFPB says the rate reduction depends on the lender, loan type, and mortgage market.
Treat claims such as “one point always lowers your rate by 0.25 percentage point” as a shortcut, not a rule. Ask for a zero-point quote and the exact point option from the same lender.
If you are considering points, see Things to Know Before Paying Mortgage Points.
4. Your down payment is not your cash to close
The down payment is only one part of the money needed to complete a purchase. Loan costs, title and settlement charges, prepaid interest, taxes, insurance, initial escrow funding, deposits already paid, and lender or seller credits can all affect the final amount.
Do not commit every available dollar to the down payment and then discover that closing leaves you without a repair or emergency reserve.
5. The monthly payment can be much more than principal and interest
A fixed-rate mortgage fixes the note rate and scheduled principal-and-interest payment. It does not freeze property taxes, homeowners insurance, HOA dues, or other ownership costs.
If mortgage insurance applies, include that too. Ask which expenses will be collected through escrow and which you must pay separately.
6. Know what kind of mortgage insurance you are paying
Conventional loans can involve private mortgage insurance (PMI). FHA and VA financing use different insurance or guarantee structures and different rules.
For many covered conventional mortgages on principal residences, federal PMI cancellation rights include a borrower-request threshold at 80% of original value and automatic termination generally at the scheduled 78% point when the borrower is current.
See Things to Know Before Paying PMI before assuming the insurance lasts for the entire loan.
7. A quoted mortgage rate is not necessarily locked
Mortgage rates can move while your application is being processed. CFPB says rate locks are commonly offered for periods such as 30, 45, or 60 days, although terms vary.
Check Page 1 of the Loan Estimate to see whether the rate is locked and when the lock expires.
See Things to Know Before Locking a Mortgage Rate.
8. Read adjustable-rate features as a formula, not a teaser
For an adjustable-rate mortgage, the initial rate is only part of the decision. You need the index, margin, adjustment schedule, and rate caps.
The fully indexed rate is generally the index plus the contractual margin, subject to the loan’s caps and other terms. Stress-test the payment if rates rise rather than assuming you will refinance before the first adjustment.
See Things to Know Before Choosing a Fixed vs. Adjustable-Rate Mortgage.
9. Compare the final Closing Disclosure with what you agreed to
For most covered mortgages, the Closing Disclosure must be provided at least three business days before closing. It shows the final loan terms, projected payments, closing costs, and cash-to-close calculation.
Compare it with your latest Loan Estimate. Ask about changes before signing instead of assuming every difference is routine.
See Things to Know Before Closing on a House.
Before You Get a Mortgage Checklist
- Request comparable Loan Estimates from multiple lenders.
- Compare rate, APR, points, lender credits, and origination charges.
- Estimate the full monthly housing cost.
- Confirm whether mortgage insurance applies.
- Check whether the rate is locked and when the lock expires.
- Keep enough cash for closing and a post-closing reserve.
- Compare the Closing Disclosure with your latest Loan Estimate.
FAQ
Does a Loan Estimate mean my mortgage is approved?
No. It describes the loan the lender expects to offer based on the information provided. Underwriting, property review, documentation, and final approval still follow.
Should I choose the mortgage with the lowest APR?
Not automatically. APR is useful for comparison, but also consider cash to close, monthly payment, loan features, points or credits, and how long you expect to keep the loan.
Can the mortgage rate change after I receive a Loan Estimate?
Yes, if the rate is not locked. Even after a lock, expiration or changes affecting the application can alter the final pricing under the lender’s terms.
Related Guides
The Bottom Line
Do not choose a mortgage from an advertisement or a single headline rate. Get comparable Loan Estimates, understand the upfront-versus-monthly tradeoffs, and verify the final terms before closing.