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Purchasing a home is the biggest financial decision that most people will ever make. When buying a home, most people will need to take out a mortgage to finance the vast majority of the purchase price. When taking out a mortgage, it is important that you properly compare several different mortgage offers. There are several different factors in particular that you need to consider when comparing one mortgage offer to the next.

Interest Rate

The first factor that needs to be considered when you are buying a home is the interest rate on the mortgage. The interest rate is the most significant factor that will influence the overall cost of the mortgage. In general, it would be a good idea to pick a mortgage with the lowest interest rate possible. While interest expenses are tax deductible, saving even a quarter of a point will save you tens of thousands of dollars over the course of the loan.

Loan Fees

When you are comparing mortgage offers another factor that you need to consider are the loan fees that you will pay. Beyond paying interest every month, most banks will also charge you origination fees that will influence the overall cost of the loan. In most cases, these fees will be a few thousand dollars, which need to be paid when the loan closes. Some banks may try to sway home buyers by offering a lower interest rate, but will charge higher fees at loan origination to offset the reduced rate. In most cases, it will take at least ten years through reduced interest charges to offset the costs associated with the higher origination fees.


Another factor that needs to be considered when comparing mortgages is the amortization schedule. Amortization schedules for a mortgage will run anywhere from ten to forty years, with most people choosing a traditional thirty-year mortgage. While choosing a longer term amortization schedule will result in lower payments, the interest rate that you are charged tends to be higher and you will pay far more in interest over the life of the loan.

Fixed or Variable Interest Rates

Choosing between a fixed or variable interest rate is also a big decision to make. Adjustable rate mortgages will provide a very low interest rate for up to seven years, at which point the rate can reset and could be much higher. If you plan on keeping a mortgage for a long time, then a fixed rate mortgage could be a better option.