When shopping for a mortgage, the general consumer can get very confused at times. Even if you have bought or refinanced several times in the past, it can still be confusing.
It doesn't matter if you are applying for a FHA, conventional, VA, or subprime mortgage. The Good Faith Estimate (GFE) is very critical when shopping for a mortgage. But you have to be careful because more than 75% of this piece of paper is an estimate. Some loan officers will cut corners just to make their total estimate look cheaper.
Three things that you want to look for when you first look at your GFE.
- Look at the loan program and make sure this is the program that you want. If it was an adjustable, it would say differently. (Yellow highlight -- Upper right hand corner)
- Look at the rate. Make sure this is what you discussed when speaking to your loan officer. (Up top, middle of page, yellow highlight)
- The 3rd issue are the fees. Everything in section 801 to 820 would be the lenders fees or anything the lender is going to charge you. Don't ever be fooled if one lenders fee is higher than the other. You still need to compare the rate. You also need to speak to your accountant to find out what can be written off. (left hand column with 10 to 15 highlighted items)
Usually just the points can be written off. And some lenders make their good faiths seem like there are no fees, but they will put a charge on line 808, the mortgage broker fee. This might be a fee to pay down your rate some. But they aren't do you a service because this fee can be written off on your tax returns the following year. Overall, you need to compare apples to apples.
Conclusion : Again, don't always shop and ask for total fees. Compare the lenders fees the most. In the state of New Jersey, the clients taxes are escrowed every quarter. That means that your taxes are paid every 3 months. But generally you will be reimbursing the seller in regards to the taxes that were already paid for in advance and what the lender will need to escrow. This usually comes out to 4 months that would need to be collected. Know your states requirements. I was being compared to another lender who only put 3 months down. He also lowered the title insurance by $300. It's very easy for a loan officer to say at closing, "these aren't my fees, so all I can do is give an estimate." Word of advice, yes, it's an estimate. But if they have been doing this for sometime, they should have a good idea of these other fees. Also, if they don't know, they should be asking the title company or someone else. Lastly, just be careful, because some of these figures are not worth the paper that they are written on. It's just that, an estimate based on good faith. Make sure that you always speak with a Mortgage Professional. Just be careful not to shop that yourself right out of the market.
Lastly, if you have 3 good faith estimates in front of you, always go back to the person that you had the best feeling with, that you are comfortable the most with, and share the other 2 with them. Just don't run to the person with the best rate and or fees. I always like my clients to come back to me no matter what. I might be able to point something out to them. And this topic must be discussed when receiving a GFE, otherwise this GFE doesn't mean squat. Mortgage Rates -- Locking or Floating -- Part 2 of 2
Reminder : Don't always compare the APR also. I am writing a post on this tomorrow. And keep in mind, rates change daily. Don't take a week to shop. And if someone takes more than a half a day to get you a good faith estimate, this might be a red flag. If I am not really busy, it would take me a few hours. If I am really busy, less than 24 hours. If it takes a few days, run, don't walk from this individual.
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Copyright © 2007 by Jeff Belonger