You get three mortgage quotes. One shows 6.875%. One shows 6.75%. One shows 7.0%. Which is actually the best deal? The interest rate alone does not tell you. Here is how to compare mortgage quotes accurately.
Annual Percentage Rate (APR) converts your interest rate plus most lender fees into a single annual rate figure, making it easier to compare quotes on a like-for-like basis. A quote at 6.75% with $4,000 in origination fees will have a higher APR than 6.75% with no origination fees -- because you are effectively paying more to get the same rate. The catch: APR assumes you hold the loan for its full term. If you sell or refinance in 5-7 years, paying points upfront may not pay off.
A discount point is prepaid interest -- one point equals 1% of the loan amount. Paying one point on a $500,000 loan costs $5,000 upfront in exchange for a lower interest rate, typically around 0.25% per point. Points can lower your APR but increase your cash-to-close. Whether buying points makes sense depends entirely on how long you keep the loan.
Example: borrowing $480,000, choosing between 7.0% with no points (payment ~$3,196/month) vs 6.75% with 1 point ($4,800) (payment ~$3,113/month). Monthly savings: $83. Break-even: $4,800 / $83 = 58 months (4.8 years). If you keep the loan longer than 58 months, Option B wins. If you sell or refinance sooner, Option A was better.
ARMs are priced lower than fixed-rate loans during the initial fixed period. A 5/1 ARM is fixed for 5 years, then adjusts annually. Compare ARMs to fixed-rate loans using the worst-case scenario for adjustments -- not the best case. For buyers planning to sell within 5-7 years, an ARM can be a legitimate cost-reduction strategy. For buyers who want payment certainty, a 30-year fixed is typically right in Pennsylvania's purchase-heavy market.
The Loan Estimate is a standardized three-page form all lenders must provide within three business days of a completed application. Key sections: Section A (origination charges -- lender fees, where points appear), Section B (services you cannot shop for), the APR field (use this to compare total lender cost across quotes), and the Comparisons table on page 3 showing APR and total interest paid at 5 years. For more detail, see our guide on reading a Loan Estimate.
Mortgage brokers are compensated in one of two ways. In a lender-paid model, the broker is paid through a yield spread built into the rate -- you do not write a check to the broker at closing. In a borrower-paid model, the broker charges a fee directly to you and can offer a lower rate. At Zurn Mortgages, I use lender-paid compensation. See mortgage broker fees in Pennsylvania for a full explanation.
Advertised rates are almost always quoted for the best-case borrower -- 20% down, 780+ credit score, 60-day lock, single-family primary residence. Your actual rate varies based on credit score, down payment, property type, loan size, and lock period. The only accurate quote is one run against your actual profile.
Disclosure: Zurn Mortgages LLC (NMLS #2462161), Alexander Zurn (NMLS #1753707). Rate examples are illustrative and not current rate quotes. Actual rates depend on individual qualifications and market conditions at time of lock. This is not a commitment to lend. Equal Housing Opportunity.
I will run your profile across multiple wholesale lenders and show you the APR, points, and total cost side by side -- not just the rate.