Mortgage brokers are not always known for being honest. Congress passed a law requiring mortgage brokers to disclose their fees. The act is called RESPA. It stands for Real Estate Settlement Procedures Act. By law, you should get the good faith estimate within three days after application. However, there are easier ways to get the job done.
Get A Free Copy Of Your Credit Report
What do lenders really need? They do need to know your Fico score to see what rate you will get. Another law that was passed is called the Fair Credit Protection Act. It allows you to get one free credit report per year. You can get the report from http://www.annualcreditreport.com This is the only site that is free because it was the only site mandated by congress to give you a free report. Once you get a copy of your report, find out what your Fico score is to tell your lender. If you don't know the score they will usually try to waste your time with a full application and all that.
Your lender may ask you a few questions like have you ever been bankrupt and what is your yearly salary? He or she does not need to do a full application. If the lender insists on a full application before working with you just thank them for their time and hang up the phone. The phone interview should only take 5-10 minutes.
Ask For A Good Faith Estimate
Ask your lender for a good faith estimate. They all know what it is and will be happy to send you one. The good faith estimate will show the lender fees. Pay particular attention to the origination fee, document fees, processing fees, and any other fees. Also, check the title fees because these can vary a lot from lender to lender. These fees are what the lender is charging you to do the loan. Many lenders pretend the origination fee is the only fee they receive, but most hide fees in other areas of the estimate. Get a good faith estimate from several lenders. Don't just pick the first one because you won't know what you should be comparing it to. If you need help, ask your Realtor.
Compare Prices Online
You can compare many prices online at once. Check the interest rate that doesn't have points and compare it to other rates that don't have points. You should always check the annual percentage rate (APR) as well. The APR is the interest rate for the loan plus the fees added in. Sometimes a rate looks great, but if you check the APR you will see that you have to pay a lot of money to buy that rate down. A lot of the rates are misleading, so you have to do some work double checking the rate, APR, and points (points are basically fees to buy down the loan).
Where To Go?
Your best rates will be provided by small mortgage brokers and some credit unions. Credit Unions with federal in the name are usually pretty good. Banks and large brokerages usually have higher rates and fees. The market leader is Countrywide Mortgage. I would start there, as a comparison. I say start, because I have always been able to get a better deal elsewhere. They are good because they let you know what the average person will pay.
Check Interest Rates And Lock Them In?
All a lender needs to lock in your rate is the address of the property you are buying. You may hear a lot of excuses why they can't lock the rate, but these are just sales tactics. A broker can lock you in a matter of minutes with nothing, but the property address. You always should lock. You have to keep in mind that a lot of lenders talk to you about the rate. They get a feel for your expectations and then watch the rates every day. If the rate dips a little, they lock the rate in at the lower rate. Do you think they ever tell you? Sadly, they don't; it's extra money for them.
Rates Fluctuate
Lenders will hate you, but you should put yourself first. I say this after trying to be nice to so many lenders. Lenders always look out for themselves. You should be trying to get the best deal you can. Here's the secret. You can lock in the rate many times. You just have to choose different lenders. Your own broker can even lock with several lenders even though most won't do it. Brokers have the choice to go through so many wholesalers it's unbelievable. If you break a lock with one, they simply pick another lender. Lenders don't like buyers doing this because it requires them to do more paperwork. However, if the rate moves on you before the loan is closed; you may wish to relock with another lender. Remember that, regardless of what any lender says, you can walk away at any time until you sign the papers. The only fee you may get stuck with is the appraisal fee. And, most times, you can use the appraisal with the new lender.
At Closing
Take your good faith estimate with you to compare with the closing documents. Many times the good faith estimate is not even close to the loan you are looking at. You may feel a little pressured to just sign the papers. Be patient and firm about looking things over. If the good faith estimate is a little off, you should cut the broker some slack because it's hard to estimate exactly. If, however, there are egregious errors get up and walk away. You have every right to. To make the whole thing a lot easier, ask to come by the day before and pick up the closing papers for your viewing. Title companies will usually schedule you a very tight time frame to sign the papers. They want you in and out quick. They always rush you and encourage you not to read the loan documents. The truth is that 95% of people, or more, just sign the papers without knowing what's going on. This is why some bad mortgage brokers can just throw in some extra junk for you.
Summary
Getting a good deal is a matter of being patient, keeping your eyes open, and reading all the documentation. Don't rely on verbal statements. Keep yourself open to anything until you've signed the papers. Good Luck and Enjoy That New Home.
I had one lender that had us close at the title company and sign all the documents. The lenders secret was that he didn't even have the loan done yet. He still had to find a way to get it done. The loan actually closed weeks later. For this reason, I would pick your own title company. It's your right to pick the title company, not theirs. If any type of fraud is to be done, the title company is usually involved. You want them to be loyal to you; not the lender.
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