Did you know that the average borrower is paying an extra $500-$1350
in extra fees on a mortgage loan, and that over 75% of home loans have
hidden fees and/or overcharges? These, in addition to paying a higher
interest rate than necessary can cost you tens of thousands of dollars!
If your current lender has not offered you a good faith estimate for your
loan, please beware
as this is the standard procedure for an estimate of your fees and rates in
writing.
Basically there are five kinds of closing costs:
1. Fees that the broker or lender charges
2. Fees that third parties control
3. Taxes
4. Title insurance
5. Prepaid items
When you compare lenders' offers and quotes, the first two types of costs
are the
ones to pay most attention to. These are the costs that lenders are most
likely
to estimate correctly on the estimate.
Have the lender explain all loan options available to your situation. Rates
for different programs vary, as do the terms available and fees associated
with each loan.
It's good idea to review your credit report and make sure that everything is
correct, as the higher your credit score, the better rates and loan terms
are generally available. If you need a copy of your credit report, you can
get one here
When applying for a mortgage loan, it's a good idea to start gathering some
of the documents that
may be necessary to complete the loan process, such as bank statements, W-2
forms, 401K statements
and 2 previous year's tax returns. If you are refinancing, you will need to
have your homeowner's insurance up to date or renewed. This is a great time
to get some competing quotes to make sure you're getting the best deal for
the
coverages you need.
Understanding your good-faith estimate:
When you submit an application and apply for a mortgage loan, the lender
is required to give you a standard form called the good-faith estimate,
which outlines the closing costs of your loan scenario.
This is, however an estimate -
Your good-faith estimate is divided into several sections of fees, each
indicated by a range of numbers: the 800s, 900s, 1000s, 1100s, 1200s and
1300s. When comparison-shopping, the most important fees to examine are
the ones listed in the 800 section, Most of these items are controlled
by the lender or broker, so the estimates should be accurate.
A few of the items in the 800 section are charged by third parties, but
the lender shouldn't be far off in those estimates.
The lender also has direct control over origination and discount points
and fees (801 and 802) and administrative, underwriting, processing,
funding, document prep, wire transfer and other fees (810 and higher).
There are other fees listed in the additional sections, but the above
fees are the ones most easily negotiated and compared, and are the ones
most effectively used in loan comparisons.
And ALWAYS ask the broker or lender to explain anything you don't
understand.
A home is a very important investment.
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