Borrowers Need To Beware Of Costs Associated With Interest Rates

There will always be ways for lenders to quote lower rates, although the borrower may end up paying more. Borrowers need this type of education so they can be better informed.

George, sometimes buyers will come to me and have the lender they want to use and i will ask them about the costs and experience with this lender...they don't have  a clue sometimes...

George, We see this trick all the time especailly with internet lenders. I warn my buyers to look over all the facts carefully and even better to bring in a quote with a closing costs breakdown and let me review it with them.

Thanks so much for doing a follow up on this. Buyers need to pay close attention to the interest rate, APR, along with other factors when choosing a lender. And like you said, a lower interest rate may not be the cheapest rate.  It is sad how some lenders conceal discount points and other hidden fees.

George these are great tips for those looking for a loan.  If the lender refuses to give the requested information that in itself is a red flag.

George, as always this is valuable information for those seeking a mortgage!

When rate shoppers use online tools like bankrate.com to compare pricing, they need to be very aware of the gamesmanship the lenders play with their rates and fees to rank higher on the bankrate listing. It's a shell game and until the GFE is issued a consumer shouldn't rely upon what they've seen advertised or been told.

George, thanks for bringing this topic to us. We LO's tend to forget the education part of our job and only work on Marketing. Oh, I forgot being educated in Mortgages is a form of Marketing because you have something to share of value. 

Total cost should always be considered, as well as how long the borrower expects to hold the loan before selling or refinancing.  Lower rate/higher closing costs can make sense if the loan will be held for a long time - but for most borrowers, lowest overall cost usually makes sense.

George-Thanks for the magic words. Since every industry has its jargon it is important to know how to ask questions using words that will get answers to the important questions.

George, a sharp buyer will know to ask the lender a hypothetical question with a specific home value and taxes to get an idea as to what the monthly cost will be. Things are not always as they appear.

Always important to look at the APR and get a good faith estimate, great infor thanks.

George good info for buyers to understand and use when shopping for a lender. The interest rate is not the most important thing.  Ask about the APR and Fees you're expected to pay.

George, what is "borrower beware" about a lender not giving the fee worksheet to the borrower. One can certainly do so and it is much easier to understand, which is to say the new GFE is difficult for them to understand. But the fee worksheet has the same information as the GFE. That is where the GFE data comes from. A lender cannot have info on the worksheet and suddenly say, oh, btw, I'm using this not the GFE. 

One thing a borrower needs to beware of is that a GFE from a broker and a mortgage banker will look entirely different, but it does not mean the one with less information is the better deal.

This is something I never understood when getting a loan, then I got into real estate and I still had trouble grasping this for awhile.

I haven't heard of a "Fee Worksheet". Thanks for the tip!

Isn't a MLO compelled to provide a GFE to the borrower up to the third day after the borrower submits all the information on the property he's interested in purchasing or am I mistaken?

George,

You're asking more understanding by consumers than their protectors in congress or God forbid the HUD/FHA bureaucrats can understand!

If a consumer wants to know the true cost of a loan: add up all the closing, all then the total of the payments principal and interest (plus PMI or FHA insurance) for the time they except to hold the property time they! Then do the same with a loan at a diffrent rate: compare the remaining balances adding or subtracting the diffrence to know the true cost of the loan for the time they will own the home.

Any time a consumer will hold a loan 5 years or less a higher rate is normally a better buy and if you add the time value of the consumers money it takes at least 7 years for the lower rates to break even.

This assumes that the consumer has the extra cash to wast on the lower rate.

Another thought, it's not lack of equity that causes people problems it's the lack of liquid! My advice is take the least costly rate and only put down that amount that leaves you enough liquid funds to protect yourself!

APR was a great idea for your great grandparents, but it's never shown a true cost for any mortgage!

Bill

Great advice George! Most people don't know what to ask for from their lender, so asking them for "the costs in Box A" and the APR are the simple, straightforward questions they can ask before deciding who to go with.

It's sad that so many try to get clients by being just a bit dishonest.