Closing costs and prepaids factor into mortgage loan comparisons

Understanding what is included in closing costs for buying a house and the difference between prepaids, closing costs and other fees associated with closing can help you shop for lower mortgage rates.

Prepaid items should be the same from one lender to the next. They are separate from your mortgage closing costs, rate and terms. As such, you can remove them from your cost comparisons.

Separating closing costs and prepaids should make comparing mortgage rates easy. If you're unsure about whether a certain item is included in closing costs or prepaids, just ask yourself a simple question: "Is this a charge that I would have if I wasn't borrowing to buy the house?"

If the answer is "yes," it's a prepaid item.