I am Peter Thompson, My goal is to take the mystery out of the home buying and mortgage process, and help home buyers understand their options.

Once you have decided on the type of loan that will best meet your needs, it is time to compare rates and prices to make sure you are getting the deal that is right for you. Ads for mortgages are everywhere, on the internet, over the TV and radio, and in the newspaper. The focus of most of these ads is that they can get you the lowest rate. Many people think of loans as a commodity, and that one lender is the same as another, so the decision should be made strictly based on who has the best rate. This can be a big mistake. While it is true that many lenders may have the same loan programs, there are other factors you need to compare to make sure you are getting exactly what you think you are. Besides the rate, you need to compare a company’s fees, the terms, the quality of their service, and the company’s reputation. Getting a good rate is important. But if the company you choose is not able to close on time, or doesn’t deliver at the terms you expected, a low rate is no bargain.

In order to know how to compare loan offers, it helps to understand how the mortgage market operates. The truth is, nearly everyone borrows money from the same sources. Outside of government loans and loans for higher priced homes (currently loans of more than $359,650), the majority of loans end up in the portfolio of one of two organizations, FNMA or FHLMC, often called Fanny Mae and Freddy Mac. These organizations are government sponsored corporations that are charged with buying up mortgages in the aftermarket, packaging them into investments that are sold on Wall Street, and making sure there is always money available to lend for mortgages.

These companies set the standard for qualifying, and they also establish a base for the prices that all of the end lenders charge. Lenders price their loans with the expectation that they will be selling their loan, and eventually delivering it to one of these organizations.

What all this means to you, is that the true rates on mortgages are usually going to be close to the same from one lender to the next. The range in rates for the same product is typically going to be only 1/8 to ¼ point difference among most lenders. But if you are looking at the newspapers, or searching the internet, you may see advertised rates that are much lower. These look attractive, but you need to know exactly what you are getting. What makes this complicated is the way that lenders show their prices to their customers. Because most consumers are looking for the lowest rate, it’s easy for unscrupulous companies to manipulate the fees and the terms in order to appear to offer a rate lower than it actually is. When comparing mortgages, you need to compare apples to apples; too often, you think you are comparing apples, but you are really getting baloney.