Yesterday, Zillow announced a True Cost tool tauted to allow borrowers to make an apples-to-apples comparison of custom quotes. Mary Miller - director of product management writes:
What is True Cost?
True Cost is the sum total borrowers will pay in interest and fees during the expected time they plan to keep the loan. We call it True Cost, because it is the amount of money borrowers will never recoup. It does not include the principal accumulated, since principal is not an outright cost, but rather, it is equity that borrowers will likely get back when they sell their homes. However, we display the amount of accumulated principal as an additional number to consider, because principal will grow at varying rates depending on loan program.
Why is it important to look at a True Cost calculation?
When comparing mortgage quotes, most borrowers focus on two factors: interest rate and upfront fees. But it's difficult to determine whether it makes more sense to choose a loan with a lower rate and higher fees, or a loan with higher fees and a lower rate. The best combination depends on how long borrowers will have the loan.
For example, a lower rate with higher upfront fees may make the most sense if borrowers keep the loan for 20 years, but low fees with a higher rate may be a better way to go if they are only staying in the home for 4 years.
True Cost calculates these tradeoffs between rate and fees and does the math for borrowers. It helps them find the least expensive loan for their expected timeframe based on rate and fees.
How does it work?
After submitting an anonymous loan request on Zillow Mortgage Marketplace, borrowers view custom quotes received from lenders on the Quotes Received page. They can use the True Cost feature by selecting how long they plan to stay in their home, and then Zillow calculates how much they will pay in interest and fees over that time period. Borrowers can click the top of the True Cost column to sort the least expensive loans for the given time period to the top of the list. They can also adjust the time drop-down to see how costs will change if they end up keeping the loan longer or shorter than they expect.
Borrowers should use True Cost as a starting point to find the least expensive loans, then use the monthly payment and fees filter to remove quotes they cannot afford. Once they narrow down to a few quotes, they can check out the lender profiles, reviews, and ratings, and then select a couple of lenders to contact.
It's received good reviews! So try it out. I'll add it to my resources page. The tool is found at the Zillow Mortgage Marketplace.
Jeff
Neighborly Realty
Http://www.EnglePropertiesOnline.com
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