RESPA (Real Estate Settlement and Procedures Act) reformed the GFE (Good Faith Estimate) effective January 1, 2010, into a new, easier-to-read format that allows homeowners to compare new loan quotes. This document makes comparing mortgage rates easier and more comprehensive than any required documentation in the past. Comparing rates needs more than just the raw interest rate number; considering the cost of the loan is just as crucial.

1. • 1

     Call the lenders and request the quotes. The lenders will ask for permission to pull your credit. At this time do not allow them to, it could negatively impact your credit scores and your rate.

   • 2

     Input all of the quotes information into a GFE's shopping chart. This section accommodates up to five quotes on one sheet. It is on the last page of the GFE.

   • 3

     Calculate the time it takes to realize actual savings. One way to compare loans is to calculate the number of months it takes to realize the savings, and compare that with how long you expect to keep the loan. Subtract the new payment from the current payment; be sure to exclude any escrows in the payments. Divide the closing costs by this savings, and this number is how many payments are needed to realize the actual savings.

   • 4

     Compare the months it takes to recover the closing costs against the expected length of time you will keep the mortgage. If Loan 1 offers savings of $139 a month that recoup the costs of the loan in 22 months; and Loan 2 offers savings of $215 a month and recoups the costs in 41 months, the homeowners' expected situation could determine which loan is best. If they expect to have the loan for five years (60 months) the savings with Loan 1 would be $5,282 (60-22=38. 38x$139=$5,282). The savings with Loan 2 would be $4,085 (60-41=19. 19x$215=$4085). Clearly in this scenario Loan 1 is best. However, if the homeowners are staying for 10 years, Loan 2 would save the most in the long-term.