How To Shop For A Mortgage Loan? | Yale Roth M.A., M.Ed

Mortgage FAQ – How To Shop For A Mortgage?

September 9th, 2011 |

Author: yroth

A lot of people I talk to have no idea (through no fault of their own) how to shop for a mortgage.

It’s almost as bad as buying a car.

This article will help you.

The first thing you want to identify is the loan program or mortgage type you want. Do you want a low payment and the security of a 30 year fixed mortgage?

Do you want a lower payment and lower mortgage rate because you won’t be in your home for long? Then an adjustable rate mortgage ARM may be better.

Do you want to save money in interest payments? Then a shorter term mortgage like a 20 yr fixed, 15 or 10 year fixed mortgage would be best.

So, after deciding what mortgage you want, then you look at and compare mortgage interest rates.

Mortgage interest rates are a commodity. That is, they are the same no matter what bank or mortgage company is offering them.

3.25% – for example – is the same 3.25% every where it’s being offered. That’s easy enough.

Here’s where people get confused. YOU WANT TO KNOW WHAT THE LENDER IS CHARGING YOU FOR THE MORTGAGE RATE.

Not the total closing costs, but get from the loan officer or mortgage broker the TOTAL LENDER FEES.

A lot of people will hear or want “no points” and think they are getting a deal. WRONG.

Just because you’re being quoted a mortgage rate with no points doesn’t mean you won’t have to pay the lender $1550 (for example) in lender fees. They may be called an “underwriting fee, or processing fee or doc prep fee.”

So two mortgage brokers will quote you a mortgage rate and say “no points.” However, the one mortgage broker is charging you $750 in lender fees while the other one is charging you $1550 in lender fees. See the difference? Why pay more for the same product?

What the name of the fee is doesn’t matter. What matters is the bottom line: that is “what, Mr. Loan Officer, are the total lender fees for the mortgage rate you’re quoting me.”

Don’t be confused when you’re told “no points” as some loan officers and mortgage brokers will use this as a red herring to confuse you.

Ask for the Good Faith Estimate. This will show you the total lender fees you’re paying for the mortgage rate you’re being quoted.

The Good Faith Estimate was revised in January 2010. The old GFE showed an itemization of fees. The borrower had little idea how to understand this so Congress and HUD changed the GFE format.

HUD recognized that the original GFE was confusing and said that the lender fees have to be added up and shown as a lump sum so it can be easier to compare with other mortgage companies and shopped.

In conclusion, when shopping for a mortgage, you’re comparing mortgage rates and WHAT THE LENDER IS DIRECTLY CHARGING YOU TO GET THAT RATE (i.e. total lender fees.)

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