What Should I Look for in a Mortgage?

Look at the total cost and the risks of each offer, not just the interest rate. Get Loan Estimates from at least three lenders on the same day for the same loan, then compare the rate and APR, any points (upfront fees to lower the rate) or lender credits, the lender's own fees, the cash you need at closing, and the mortgage insurance. Then check page 1 for features that can raise your cost later: a prepayment penalty, a balloon payment, or a rate, payment, or balance that can increase after closing.

Which lines on the Loan Estimate should you compare?

The Loan Estimate is the standard 3-page form every lender must give you after you apply, so the same figure sits in the same place on every offer.

The CFPB's homebuyer toolkit says to focus on Sections A and B when comparing lenders, because you can shop for Section C services, such as title and settlement, no matter which lender you choose. What lender fees include explains each charge in Section A.

Interest rate or APR: which should you compare?

The interest rate is the yearly cost of borrowing, not counting fees. The annual percentage rate (APR) adds points, mortgage broker fees, and other charges you pay to get the loan, so it is usually higher than the rate. Use both, with three limits:

• APR assumes you keep the loan for the full term. If you expect to sell or refinance within a few years, the offer with the lower APR can cost more.
• Do not compare a fixed-rate APR with an adjustable-rate APR. An ARM's APR does not reflect the highest rate the loan could reach.
• Compare like with like. Ask each lender for the same loan amount, term, and loan type, and for the same number of points, such as zero. One point equals 1% of the loan amount.

Interest rates versus APRs shows how the APR is calculated and how to weigh paying points.

Example: comparing two offers with a lender credit

You are buying a $380,000 home with 10% down and borrowing $342,000 on a 30-year fixed-rate loan. Freddie Mac's average 30-year fixed rate for the week of October 22, 2026 was 7.32%, and the rates below are examples near that level. Both lenders charge $1,200 in Section A and quote the same mortgage insurance.

Offer B costs $2,304.12 - $2,246.70 = $57.42 more a month. Dividing the credit by that difference, $3,420 / $57.42, gives about 60 months before the higher payments use up the credit. Because Offer A's lower rate also pays the balance down faster, the crossover comes a little sooner when you count interest:

• After 3 years: Offer B's interest minus the credit is about $843 less than Offer A's interest.
• After 4 years: the two are within about $21 of each other.
• After 5 years: Offer A is about $885 cheaper, and the gap grows every year after.

Offer B fits a buyer who needs to keep cash at closing or expects to sell or refinance within about 4 years. Offer A fits a buyer who can cover the higher cash to close and plans to keep the loan longer. Run the same math with your own offers. For five-year borrowing cost, start with the first "In 5 Years" figure on page 3, which counts principal, interest, mortgage insurance, and loan costs for the first 60 months. Subtract the second figure, principal paid off, then subtract any Section J lender credit ($3,420 for Offer B), which is not included in that total.

How should you compare mortgage insurance?

On a conventional loan with less than 20% down, you usually pay private mortgage insurance (PMI), which protects the lender if you stop paying. Compare the monthly amount in Projected Payments on each estimate and ask when it ends. Under federal rules, you can ask the servicer to cancel PMI once your balance is scheduled to reach 80% of the home's original value. You must request cancellation in writing, be current with a good payment history, and meet the servicer's requirements for evidence that the home's value has not fallen below its original value and certification that there are no junior liens, such as a second mortgage. The servicer must end PMI automatically when the balance is scheduled to reach 78% of the home's original value if your payments are current. If you are behind, termination waits until shortly after you bring payments current.

The CFPB toolkit notes that "no PMI" or "lender-paid PMI" offers often carry a higher interest rate, so compare the full payment. FHA and VA loans have their own mortgage insurance or fee rules, which the different types of mortgage loans compares.

Which loan features should you avoid or ask about?

Prepayment penalty. This is a fee for paying off all or a large part of the loan early, including when you sell or refinance. Federal rules allow one only on a fixed-rate qualified mortgage (a loan that meets the federal ability-to-repay standards) that is not a higher-priced loan. A higher-priced loan has an APR at or above a federal cutoff based on rates for comparable low-risk mortgages. Even then, the penalty can be no more than 2% of the balance paid early in the first two years, 1% in the third year, and nothing after that. A lender that offers a loan with a penalty must also offer you one without, so ask for both quotes and compare total costs.

Balloon payment. A balloon is a large lump sum due at the end of the loan, sometimes most of the original balance. The Loan Estimate answers YES if any scheduled payment is more than twice a regular payment. Qualified mortgages cannot have one, with limited exceptions.

A rate, payment, or balance that can increase. On an adjustable-rate mortgage (ARM), the rate resets after the starting period to an index (a market rate) plus a fixed margin, up to the caps in the loan. The Adjustable Interest Rate table on page 2 shows the index, the margin, how much the rate can change at the first adjustment and later ones, and the maximum rate. Work out your payment at that maximum before you accept the loan, because adjustments follow the market, not your finances. A YES next to the loan amount in Loan Terms means the balance can grow, a feature qualified mortgages do not allow.

Loan term. A shorter term raises the monthly payment and cuts total interest. Freddie Mac's 15-year average for the same week was 6.68%. A 15-year versus a 30-year mortgage compares the two, and what a mortgage is covers how the payment and loan documents work.