What to compare when you are choosing a lender.

Every lender is required to give you a Loan Estimate within three business days of taking your application, and it is the same three-page form from every lender, which is exactly what makes comparison possible. Get at least three, on the same loan amount, same program, and same purchase price, and my advice is to go into it with the same attitude you bring to the home search: curious, patient, and not easily impressed by a single number. Your lender choice controls thousands of dollars of your life, so it is worth an afternoon of your attention.

Start with rate versus APR

The interest rate is the price of the money, and the APR is the price of the whole deal spread out. The APR blends the rate with the loan's fees, including origination charges and discount points, into one annual percentage, which makes it the single best "at a glance" number for catching a lender whose low rate comes with high fees. If two lenders quote the same rate but different APRs, the higher APR is the more expensive loan.

Here is the catch that makes APR imperfect: it assumes you keep the loan for the full term. A buyer who pays points to buy down the rate looks worse on APR than on the monthly payment, even though the points can be the right move for a buyer who plans to stay. So read the APR first to screen lenders, then do the detailed comparison below before you decide. APR catches the fees; it does not tell you which structure fits your timeline.

Section A: origination and underwriting fees

Turn to page two of the Loan Estimate and look at Section A, "Origination Charges." Everything in that section is what the lender itself charges you: an origination fee, an underwriting fee, processing, and any discount points. These are the numbers to compare most carefully, because they vary enormously between lenders, from a few hundred dollars to several thousand, and they are pure lender profit plus the actual cost of processing your loan.

A common trick is to hide the true cost in this section. A lender who quotes "no origination fee" in the ad can still be charging $1,200 in processing and underwriting. The honest question to ask is simple: "What is the total of Section A on your Loan Estimate, and what exactly is in it?" A straight answer tells you a lot about the lender, before you ever compare numbers.

Discount points: paying a little now to pay less every month

A discount point is prepaid interest, one percent of the loan amount, that buys you a lower rate. On a $150,000 loan, one point is $1,500, and it typically lowers the rate by an eighth to a quarter of a point, depending on the lender and the market. Points are listed inside Section A, and they are a perfectly legitimate tool, but they are a choice, not a requirement.

The test for points is the break-even: divide the upfront cost of the points by the monthly savings they buy. If points cost $2,000 and save you $30 a month, you break even at about 67 months, roughly five and a half years. If your plan is to stay well past that, points may be smart. If your plan is three to five years, you are paying for a break-even you will never reach. Always ask for the quote at zero points first, so you can see the rate you get for free, and then ask what the rate becomes with points. Never let points be just "included" without you knowing they are there.

Lender credits: the mirror image of points

A lender credit is the reverse of a point. You accept a higher rate, and the lender gives you money back to apply toward your closing costs. On the Loan Estimate it shows up inside Section J as a credit, and a big one can wipe out a large part of your closing costs or even most of your origination charges.

Lender credits are worth a serious look when cash at closing is the constraint, which is a common situation for Peoria first-time buyers using IHDA down payment assistance or anyone who would rather write a smaller check at the closing table. The honest trade is the same as with points, in reverse: you pay more each month for the rest of the loan in exchange for less cash now. Compare the credit against your likely time in the home, and if the loan ends sooner than the break-even, the credit was the better deal.

Closing costs and cash-to-close: the number that matters most

The rate and the payment are only half the story. The other half is the total closing costs in Section J and, most importantly, the cash-to-close in Section K, the bottom-line number you must bring to the closing table: down payment plus closing costs, minus any credits from the seller, your lender, or your real estate agent. Everything flows into K, so it is the truest single number on the form.

Sections B through F matter here too: B is services you cannot shop for, like the appraisal and credit report; C is services you can shop for, like title insurance and settlement, where a good local connection can save you real money; D is taxes and recording fees; E is prepaids like interest and insurance; F is the initial escrow. Two lenders can have the same rate and still hand you wildly different cash-to-close because of how the escrow is set up and which title fees are quoted. When you compare Loan Estimates, you compare Section J and Section K right alongside the rate, and you ask about any line in B, C, and E that sits meaningfully above the others.

The worked example: why the lowest rate is not the cheapest loan

Let me show you the math on a realistic $150,000, 30-year fixed loan, because seeing it once is worth a thousand explanations. Three lenders quote three structures:

Lender A wins the headline with the lowest rate, but look at the whole picture. Its Section A is $2,930 higher than Lender B's, buying a payment that is $26 a month lower. Divide $2,930 by $26 and you get about 113 months, roughly nine and a half years, before the lower rate pays for itself. If you keep the loan that long, Lender A is the cheapest. If you sell or refinance in five years, Lender B is cheaper by about $1,400, because you never reached the break-even. The lowest rate is a gift that only arrives if you stay for a decade.

And Lender C shows the third way: no origination and a $3,500 lender credit in exchange for a higher rate. Its payment is $25 a month above Lender A's, but it puts thousands of dollars back in your pocket at closing, which can be the deciding factor when cash is tight. None of the three is objectively "the best." The best is the one that matches how long you will stay, how much cash you have, and how you feel about monthly versus upfront. That is why I never tell a client to pick the lowest rate. I walk them through break-even on their own timeline so they pick the loan that fits their life.

What this all means in the current Peoria market

With the average 30-year fixed rate at 7.03% in the most recent confirmed Freddie Mac survey, and daily trackers running above 7.4% in early October, the structure of your loan matters more than the headline rate, which is exactly what this article is about. And the questions buyers are asking right now all come back to the same place: the numbers in front of you.

Is the Peoria market slowing down? The pace is, honestly: county days on market have stretched to 25 days, the Peoria Area Association of REALTORS found days on market roughly doubling in its second-quarter report, and buyers have about 40% more homes to choose from than a year ago. Prices are another story, the county median held roughly flat year over year, so slowing is not falling. What that means for lender choice is that the cooling market is where concessions live: a prepared buyer can ask the seller to help with closing costs or a temporary buydown, and those dollars change your cash-to-close, which is the number you feel at the table.

Do Peoria buyers have more negotiating power right now? More than a year ago, yes, mostly on homes priced above their evidence, while the well-priced home still sells fast. Negotiating seller-paid closing costs is a real lever in this market, but it only works if you already know your cash-to-close, which means getting and comparing your Loan Estimates early, before you ever write an offer. That preparation is the leverage.

Is renting still cheaper than buying in Peoria? No, in one of the few places in the country where the math genuinely favors buying: published data puts Peoria's median rent around $893 to $970 a month, while the principal and interest on a median-priced city home at 20% down runs close to $790, and the Construction Coverage study ranked Peoria the second most affordable small city for home buyers, finding buying cheaper than renting here. So for most households the real decision is not rent versus buy, it is which loan makes the buying numbers work, which is why the comparison in this article matters so much.

Should Peoria buyers wait for mortgage rates to drop? Nobody can reliably tell you where rates go next, and anyone who claims they can is selling something. What you can know is today's math: your payment at today's rate and today's price, compared with rent while you wait. And because the loan structure is in your control, you can change your payment without waiting for the market to change: points and lender credits move your payment and your cash-to-close in opposite directions, today, at the same market rate. If rates drop later and the math supports it, you refinance; prepayment is not penalized on a conventional loan. The waiting game is about the whole picture, and the whole picture starts with comparing loans properly.

A short checklist before you pick

• Compare at least three Loan Estimates on the same amount, program, and price.
• Screen with APR, then dig into Section A, points, and credits.
• Ask every lender for the zero-point rate before looking at bought-down rates.
• Compare the total closing costs in Section J and the cash-to-close in Section K, next to the rate, not instead of it.
• Run the break-even on any points or credits against your real timeline in the home.
• Ask about seller-paid closing costs or a buydown before you write the offer, and see how they change your cash-to-close.

Choosing a lender is choosing the person you will call with questions for the next three decades of this loan, and in my experience the right lender is patient, explains in plain language, and does not flinch when you ask what everything costs. The Loan Estimate is how you protect yourself, and the break-even is how you keep the lowest rate from becoming a trap. Do the math, ask the questions, and pick the loan that fits how you actually live. Because Your Move Matters, and the number that matters is the one you understand.

If you would like help reading your Loan Estimates, or a second set of eyes before you commit, call or text me at 309-361-4592, or send a note through the contact page. I will walk through the lines with you, no pressure, and you will know exactly what you are signing and why.

With gratitude,

Teri Shepherd · Broker Associate · REALTOR® · IL 475.135244 · Keller Williams Premier Realty, Peoria