A couple of key tips about interest rates:

1. There is the rate you need to know:When applying for a loan, never just ask for the “interest rate,” always ask for the APR. The APR includes fees and cost, and is the ACTUAL cost of the loan as an annual percentage (if accurately quoted). The interest rate alone does not. Therefore, it is possible that they quote you at 5.00% interest, but after commissions and expenses you have an APR of 5.50%.
2. Consult the APR:Once you’ve quoted an APR, always check it against a mortgage calculator (these are available free online at places like bankrate.com) to make sure it’s accurate. All you need is the loan amount, payment, and term to verify. If the loan amount, payment, and term you assigned do not match the APR you were quoted, then the quote was incorrect and you need to find out the truth.
3. The low rate you see is not necessarily what you get:Don’t be fooled: the low rates you see advertised are for the best qualified. This means 720 to 740 FICO or higher in today’s market, with verifiable income, maximum 80% loan-to-value, and low debt ratios. As your credit score goes down and your use of equity or debt ratio goes up, chances are your rate will too! Plus, there are plenty of added “premiums” for things like cash out, condos, and the like.
4. Fee IS NOT the #1 consideration in many cases:As important as rates and APR are, what’s more important is what you get for rates and APR. You can get a great rate and a bad loan or a competitive rate and a great loan. It’s about looking at more than just the rate and payment, but also: the term, tax costs, fees paid, the purpose of the loan, and the all-encompassing cost or benefit. In other words, if you got a great rate, but extended the term of your loan, increased your taxes, paid unnecessary fees, and didn’t capitalize on the best loan for your situation, then it wasn’t beneficial (this happens most of the time at a rate and term refinancing). But if you cut your payments, terms, taxes, reduce debt, save money up front, improve your financial position, and negotiate fair rates, you’ve really done yourself a great service!

Let me leave you with this nugget of truth from Proverbs 24:3: “By wisdom a house is built, and by understanding it is established.”