The rise of the mortgage rates in the last and current week have made many home buyers and refinance seekers to be more careful about choosing just any mortgage offer. The hunt for the lowest mortgage rates has already started as the interest rates are slowly going up.
Here is a tip for homeowners and potential homebuyers when you are out shopping for the lowest mortgage rates. Always get a Good Faith Estimate and go one step further and get a copy of the Truth in Lending form also known as the TIL. On the Good Faith Estimate quite often a second rate lender will omit fees due to selective memory or they just don’t know any better. This creates the illusion of a lower estimate and lower cash to close.
If a potential client is shopping me, I always say “please send me the other guys estimate and I will circle all of the numbers that are missing.” Missing escrows or closing fees will make a big difference to the bottom line and a bad surprise at closing. If anything it is smart to be over conservative on the good faith estimate and over estimate with no surprises at closing.
Here is another tool when shopping for the lowest mortgage rate. Get a copy of the APR on the Truth in Lending form. (TIL) Annual percentage rate or (APR) will give you a measure of the hard costs or closing costs associated with the loan. A good loan will have an APR which is very close to the note rate. In other words, if the note you are signing is at 4.875% the APR should be about 5.034%. The note rate will determine what your principle and interest payment will be but the APR will give you a measure of pre-paid finance charges such as origination points, application fees and the closing fee. The note rate and the APR will never will be identical unless your bank is paying all of your closing costs for you. Sometimes I laugh when I see a second rate lender advertising on the internet with an impossible interest rate of 4.375% on a 30 year fixed but the APR is 5.27 % or so.
This means that customer is paying at least 5 points (or percent) to get that mortgage rate. Do you think that was pointed out in the first loan officer- customer discussion?
When shopping for the lowest mortgage rate, make sure your loan officer is addressing every conceivable cost. Some second rate lenders will pass off their shoddy Good Faith estimate by saying “Well that is their fee; I have no control over their fees.” A good loan officer will call the title company on the customer’s behalf and get a quote of the title company fees and make sure the numbers are accurate. A good loan officer will read the purchase contract to see if the closing costs are being handled differently for any reason.
Like any other service, when shopping for the lowest mortgage rate, make sure you look at the big picture and don’t forget to include expertise and service in the equation along with honesty.
Written by Preston Ware
First South Mortgage
Tel: 704-542-8057
* www.prestonware.com
Email is preston@prestonware.com.
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