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Points
You will need to carefully review the points associated with each interest rate on loans offered. Remember points are paid upfront at closing and get you a negotiated lower interest rate. Points are really of value if you pan to stay in the home for long period of time. It may take several years for you to recoup the money paid upfront at closing for points, however, after that time is up you get the benefit.
Ideally you will want the lowest interest rate with the lowest points. If you can afford the extra expense of points, do plan to stay in the home for a period of time to benefit from the lower interest rate, as this may be the way to go. If you cannot afford to pay for points, you can always reconsider refinancing to a lower rate later if opportunity arises. Do remember that when you refinance later you will have to pay fees including an origination fee, which is about 1% of the loan amount.
You will need to decide on what the term of the loan needs to be to suit your needs. The term is the length you will be making payments on the loan. The most common is a 30-year term, however, if you make one extra payment each year, this will generally bring the term down to less than 24 years. Do make sure to check if there is any penalty for early payment of the loan. You may also opt for a shorter term such as a 15-year loan and the payment will be approximately 25% higher that on the 30-year. You can even opt or a shorter term again which is a 10-year mortgage. There are many options on which to choose and you need to pick the one that best meets your needs.
Again be sure to ask whether you can prepay on the loan without penalty. Prepaying reduces the principal more quickly than just making regular payments.
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