Mortgage Worksheet: How to Compare Home Loans and Get a Bank Loan to Buy a House

Getting a mortgage is the biggest financial transaction most people ever negotiate — and most people approach it by going to one lender, accepting whatever they're offered, and calling it done. That's the most expensive way to do it.

This post walks you through how to actually get a bank loan to buy a house, what numbers matter when comparing lenders, and includes a mortgage comparison worksheet you can use to make an apples-to-apples comparison across multiple offers.

How Getting a Home Loan Actually Works

Banks, credit unions, online lenders, and mortgage brokers all originate home loans. Despite what it feels like, the process follows a standard sequence:

1. Pre-qualification (optional, fast, soft credit pull) A lender gives you a rough estimate of what you might qualify for based on self-reported information. This is useful for ballpark planning but doesn't mean much to sellers. Skip it if you're serious.

2. Pre-approval (essential, hard credit pull) The lender verifies your documents — income, assets, employment, credit — and issues a formal letter stating the loan amount you qualify for. This is required to make competitive offers. Multiple hard pulls for mortgage pre-approval within a 45-day window typically count as one inquiry on your credit report.

3. Loan application (once you're under contract) Once your offer is accepted, you formally apply for the loan on a specific property. You'll fill out a Uniform Residential Loan Application (Form 1003).

4. Appraisal and underwriting The lender orders an appraisal and reviews your full file. An underwriter makes the final credit decision.

5. Clear to Close Underwriting is complete, all conditions are met, and you're cleared to sign.

6. Closing You sign documents, wire funds, and receive the keys.

What Documents You Need to Apply

Pull these together before you contact a single lender. Having them ready speeds up the process and signals to lenders that you're a serious, organized buyer.

Income documentation:

• Last 2 years of W-2s (all employers)
• Last 2 years of federal tax returns (all pages, especially if self-employed)
• Most recent 30 days of pay stubs
• If self-employed: last 2 years of business tax returns + a YTD profit-and-loss statement

Asset documentation:

• Last 2–3 months of bank statements (all accounts — checking, savings, investment)
• Last quarterly statements for 401(k), IRA, or brokerage accounts
• Documentation for any large deposits that have appeared in the last 60 days (gifts require a gift letter)

Identity and liability:

• Government-issued photo ID
• Social Security number (for credit pull)
• Landlord name and contact information for last 2 years if renting
• A list of all monthly debt obligations (car loans, student loans, credit card minimums)

Understanding the Numbers That Actually Matter

Most buyers focus on the interest rate. That's a mistake. The rate is one input — here's the full picture:

Interest Rate vs. APR

Interest rate: The annual rate charged on the loan balance itself.

APR (Annual Percentage Rate): The interest rate plus most lender fees, expressed as an annual rate. APR is always higher than the interest rate and is designed to make lenders comparable. However, it's not perfect — it can be manipulated by varying the included fees.

Rule of thumb: A lower rate with a higher APR often means higher upfront fees. A higher rate with a lower APR often means fewer upfront fees. Depending on how long you keep the loan, one may cost you less overall.

Points (Origination Points and Discount Points)

A "point" equals 1% of the loan amount. Paying points is buying down your interest rate.

• Origination points: Lender compensation for processing the loan. More points = higher lender profit, not necessarily lower rate.
• Discount points: Prepaid interest that buys down your rate. 1 point typically reduces the rate by 0.125%–0.25%.

Should you pay points? Calculate the break-even: how many months of savings at the lower payment does it take to recover the upfront cost? If you plan to keep the loan longer than the break-even point, paying points makes sense.

Example: 1 point on a $400,000 loan = $4,000. If it reduces your rate from 6.75% to 6.50%, your monthly saving is roughly $67. Break-even: $4,000 ÷ $67 = 60 months (5 years). If you plan to be in the home more than 5 years, buying the point is worth it.

Closing Costs

Every lender charges fees. They vary significantly. Common fees:

• Origination fee / lender fee
• Appraisal fee
• Credit report fee
• Title search and insurance
• Escrow / attorney fee
• Recording fees
• Prepaid interest (interest from closing date to end of month)
• Initial escrow setup (prepaid property taxes and insurance)

The lender issues a Loan Estimate within 3 business days of receiving your application. This document lists every fee. When comparing lenders, compare the Loan Estimates side by side — not just the interest rate.

Loan Term: 30-Year vs. 15-Year

A 30-year loan has a lower monthly payment but you pay significantly more interest over the life of the loan. A 15-year loan has a higher monthly payment but builds equity faster and carries a lower rate.

Comparison on a $400,000 loan:

• 30-year at 6.75%: ~$2,594/month | total interest paid over 30 years: ~$534,000
• 15-year at 6.25%: ~$3,432/month | total interest paid over 15 years: ~$218,000

The 15-year costs $838 more per month but saves you roughly $316,000 in interest. If you can afford the higher payment, the 15-year is a better deal — but only if the payments are genuinely sustainable in your budget.

Fixed vs. Adjustable Rate

Fixed-rate mortgage (FRM): The rate never changes. Payment is predictable. Typically the right choice if you plan to stay in the home for 5+ years or if rates are favorable.

Adjustable-rate mortgage (ARM): The rate is fixed for an initial period (3, 5, 7, or 10 years) and then adjusts annually. Often starts lower than a fixed rate.

Example: A 7/1 ARM at 6.00% vs. a 30-year fixed at 6.75%. If you plan to sell or refinance within 7 years, the ARM is cheaper. If rates rise after year 7, you're exposed.

ARMs are not inherently dangerous — they're a timing bet. Know your horizon before choosing one.

The Mortgage Comparison Worksheet

Use this to compare at least 2–3 lenders side by side. Request a Loan Estimate from each lender for the same loan amount and the same property (or a representative property) on the same day.

MORTGAGE COMPARISON WORKSHEET

Decision notes:

• Break-even on points (months): ______
• Expected time in home (years): ______
• Preferred lender and reason: ______

Getting the Loan: Practical Tips

Contact at least 3 lenders. Your bank or credit union, a mortgage broker (who shops multiple lenders), and at least one online lender (e.g., Better, Rocket, loanDepot). Rates vary more than most people expect.

Get quotes on the same day. Rates change daily. Comparing Monday's quote from one lender to Friday's from another is meaningless.

Negotiate. Lenders expect it. If Lender A offers a better rate but Lender B has lower fees, tell Lender A about the gap and see if they'll match. This works more often than not.

Watch for the "float down" option. Some lenders offer a rate lock with a float-down provision — if rates drop after you lock, you can get the lower rate. Usually costs a bit more.

Don't close credit cards or pay off loans right before applying. Counterintuitively, closing credit cards can lower your credit score by increasing your utilization ratio. Talk to a credit counselor or your lender before making changes.

Avoid major purchases during underwriting. Buying furniture on a store credit card or financing a car between application and closing can change your debt-to-income ratio and jeopardize approval.

What Happens If You're Self-Employed or Have Unusual Income

Self-employed borrowers face additional documentation requirements:

• 2 years of personal and business tax returns (lenders average the two years)
• A current profit-and-loss statement (sometimes required to be CPA-prepared)
• Business bank statements for 12–24 months (bank statement loans)
• Documentation that your business is active (business license, CPA letter)

Lenders use your net income after deductions, not gross revenue. If you aggressively write off business expenses (reducing your taxable income), your qualifying income for a mortgage is also reduced. This is one of the most common surprises for self-employed first-time buyers.

Bank statement loans offer an alternative for self-employed borrowers — they use 12–24 months of bank deposits rather than tax returns to document income. They carry slightly higher rates but can qualify buyers who can't document conventional income.

Make Your Mortgage Decision Confidently

Comparing mortgages is one of the highest-leverage decisions in the home buying process. Getting the best available rate and fee structure on a $400,000 loan can easily save you $50,000–$100,000 over 30 years — all for a few extra hours of comparison shopping.

The mortgage comparison worksheet above is a starting point. Our Complete First-Time Homebuyer Checklist includes a formatted, printable mortgage comparison worksheet alongside a full lender interview script, closing cost tracker, and every other tool you need for a confident purchase.

Get the complete toolkit for $14: firsthometoolkit.com/homebuyer-checklist/