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Borrowers Need To Beware Of Costs Associated With Interest Rates

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Borrowers Need To Beware Of Costs Associated With Interest Rates. Sunday I posted a blog titled "Why Is The Annual Percentage Rate (APR) Higher Than The Interest Rate" on what fees makes up the APR and why the APR is higher than the Interest Rate.  Nina Hollander re-blogged my blog and made the following statement at the end of her comment which got me to think I should expand upon it in a follow-up blog.

"So don't just go out and pick a lender based on the quoted rate."

As low as Interest Rates have been and continue to be, there are Lenders who still try to conceal Points associated with the Interest Rate they are quoting in order to quote an even lower Interest Rate.  Even with the strict advertising rules Lenders have to abide by today, Lenders, especially Internet Lenders, continue to find ways to not reveal the true cost associated with their Interest Rate.

Interest Rate shoppers need to be very careful not to fall into the trap of just looking at who has the lowest Interest Rate.  Some times the lowest Interest Rate is not the cheapest rate.  When shopping to see who has the best deal, Borrowers need to also look at the Lender's costs associated with the Loan.  The quickest way to do this is to ask each Lender for what their cost is in box "A" of the Good Faith Estimate (GFE), and to also ask for what the APR is on the Truth-In-Lending (TIL) Statement.  Most Lenders will not give a GFE prior to doing a loan, but there is no reason why they can't verbally state what their fee is in box "A" of the GFE.  If they will not do that, then Borrower Beware.

Another document Borrowers can ask for when shopping for who has the best deal, is to ask for a "Fee Worksheet" .  A Fee Worksheet is what the old GFE use to be, and actually breaks down the Closing Costs better then the GFE does.  If a Lender will not provide a Fee Worksheet then once again Borrower Beware.

However, Interest Rates and Closing Costs should not be the only reasons in choosing a Lender.  Borrowers need to look at the Service, Availability, and Knowledge of the Loan Officer they are considering working with.  Shopping for a mortgage goes beyond the Interest Rates, when shopping for a mortgage Borrowers Need To Beware Of Costs Associated With Interest Rates as well.

 

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Posted by

George Souto
NMLS# 65149

C (860) 573-1308
CALL 7 Days/Wk
Fax (860) 760-6891

Email Me
About Me
My Blog

I am a Mortgage Loan Officer who can assist you with all your mortgage & refinancing needs in
CT, and RI

I can assist you with your Conventional,
FHA, CHFA, VA, USDA, & 203K loan programs.

I reside in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Haddam. E. Haddam, Higganum, Chester, Essex, Deep River.

 

Comments(33)

Troy Erickson AZ Realtor (602) 295-6807
HomeSmart - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

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.

Jan 28, 2014 02:01 AM
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in Southern RI and beyond

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...

Jan 28, 2014 08:18 AM
Debbie Reynolds, C21 Platinum Properties
Platinum Properties- (931)771-9070 - Clarksville, TN
The Dedicated Clarksville TN Realtor-(931)320-6730

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.

Jan 28, 2014 10:18 AM
Rosie Crow
Serving Sugar Land, Richmond, Rosenberg, Missouri City - Sugar Land, TX
Exceeding Expectations. Delivering Results

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.

Jan 28, 2014 01:36 PM
Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

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.

Jan 28, 2014 02:11 PM
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

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

Jan 28, 2014 10:03 PM
Randy Mitchelson,APR
Marketing Advisor & Squeeze Mortgage - Bonita Springs, FL
First Impressions are made at First Click

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.

Jan 28, 2014 10:17 PM
Ron Aguilar
Gateway Mortgage Group - Saint George, UT
Mortgage & Real Estate Advisor since 1995

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. 

Jan 28, 2014 11:12 PM
Jeanne Dufort
Coldwell Banker Lake Country - Madison, GA
Madison and Lake Oconee GA

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.

Jan 29, 2014 12:19 AM
Wayne Johnson
Coldwell Banker D'Ann Harper REALTORS® - San Antonio, TX
San Antonio REALTOR, San Antonio Homes For Sale

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.

Jan 29, 2014 12:31 AM
Ed Silva, 203-206-0754
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

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.

Jan 29, 2014 01:14 AM
David Popoff
DMK Real Estate - Darien, CT
Realtor®,SRS, Green ~ Fairfield County, Ct

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

Jan 29, 2014 02:22 AM
Sharon Sanchez
Ace Home Realty - Carson, CA
Your Number "1" Source For Real Estate.

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.

Jan 29, 2014 02:44 AM
Dora Griffin
D A Griffin Financial.LLC - Fort Thomas, KY
NMLS 6380

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.

Jan 29, 2014 03:17 AM
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

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.

Jan 29, 2014 04:33 AM
Travis "the SOLD man" Parker; Broker/Owner
Travis Realty - Enterprise, AL
email: Travis@theSOLDman.me / cell: 334-494-7846

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

Jan 29, 2014 05:59 AM
Kimo Jarrett
Cyber Properties - Huntington Beach, CA
Pro Lifestyle Solutions

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?

Jan 29, 2014 06:26 AM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Jan 29, 2014 06:44 AM
Fred Sed
Fred Sed Group ~ Your Premier Southern California Realtors - Irvine, CA
Your Southern Cali Realtor, Why? Because Fred Se

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.

Jan 29, 2014 07:25 AM
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

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

Jan 29, 2014 07:32 AM