When you are comparing mortgages, some of the questions that come up are what is your interest rates and what are your closing costs? I always tell clients that you should compare rates and closing costs, but you also need to compare at the same time. Rates change daily and lately more than once a day! If you talk to a lender on Monday and talk to another one on Thursday, there is a really good chance that the interest rates won't be the same. If you call me and you call another lender at the same time, the rates may still vary – but shouldn't vary by very much. Today I had one investor that changed rates 3 times. It's become very common for rates to change more than once a day. If you are shopping rates, ask how long that rate is good for. Most of us will tell you that they are subject to change. I keep an eye on the mortgage bond market so if it is changing rapidly, I will try and let you know that it may change quickly.
One other item to compare is the closing costs – every lender is slightly different. Most appraisals are about the same and credit reports are about the same. When you look at a good faith estimate there are numbers by the fees. The 800 numbers are the lender fees (usually numbered 801 to about 825), the title fees are section 1100 and the government fees are section 1200, additional settlement fees are section 1300. When you are comparing lenders, compare the 800 section and make sure the other fees make sense at the same time. Each title company will vary slightly.
I had a client call me last week and he had two different lenders he was talking to along with me. He needed an FHA loan and one lender couldn't do FHA loans, so that was easy. The other lender had sent him a good faith estimate and as we compared numbers, that lender was charging fees that many in this area don't typically charge. His costs were substantially higher and my client was so glad he called around. If he hadn't, he would have been overcharged.
We have a client right now that is comparing 5 different lenders for a purchase closing in November. We have told him that he needs to make a decision soon as he is going to run out of time for his closing! The lender will have to order title work and an appraisal and still get the file underwritten before his closing date! It's a great idea to shop and compare, but try to know which lender you are going to use by the time you write your purchase agreement.
In January 2010, all lenders will be required to use the same good faith estimate. It is going to look very different and will allow buyers to know what fees they are being charged by the lender, title company and any other fees involved. I have seen a quick copy of it and it is very different from what most of us use today.
When shopping for mortgages, make sure you are comfortable with your lender, you will have to give them a lot of information and trust that they are making the right decisions for and with you. Make sure you compare rates at the same time and ask for a good faith estimate to compare costs. If a rate seems to good to be true, it may be or it may be that the lender is charging you points or additional fees to get that rate. Ask questions and feel comfortable with the lender that you choose. Get referrals from friends and your real estate agent. Your agent has worked with different lenders and will have some very good suggestions.
