Shopping For a Mortgage… Do You Know What You Are Comparing?

In this week’s article, I relate Elvis Presley’s 1974 hit “Suspicious Minds” to how clients shopping for a mortgage should be very suspicious when comparing costs.

There is no doubt that the rate and loan program is very important, but more important is how much the loan program is going to cost you at the closing table. I have many customers who want to see a cost breakdown and/or a loan estimate. A standard loan estimate will show sections numbered from 800 to 1320. Each section is specific as to what costs are charged for the entire transaction. The 800 section is the most important section when comparing lenders, as these are the fees that the lender will charge you for their services. These will differ from lender to lender and are truly the only place that you should look when comparing rates and charges.

But your immediate question is, “What about sections 900-1320?” These sections are important, but this is where all your questions should be raised. The reason why you should be suspicious of these fees is that they will be the same at the closing table with whichever lender you choose, as they are not dictated by the lender but, for the most part, by who you choose as your closing attorney in your sales contract, your closing date, your HOA fees, and the county you are closing in. Yes… regardless of the lender you choose, these fees will ultimately be the same at the closing table as the lender does not determine these fees. However, here is where you should be suspicious. As I just stated, only the 800 section fees are determined by the lender you choose. So, why is the difference in the bottom line not factoring in the lender fees? The answer is that some lenders will guess or lowball some of the attorney, escrow, and title fees under the presumption that this is just an estimate. They will also not show enough property taxes being collected and even show lower than actual property taxes, which will ultimately lower the bottom line on the estimate… And then they may or may not include the initiation fee that most HOAs collect at closing, which is also shown on your sales contract. In some cases, this will result in a significantly lower cash-to-close estimate than what you may be comparing with another lender.

Many lenders today have the cost breakdowns from most of the closing attorneys in Metro Atlanta, not estimates of actual costs that are pretty much guaranteed. So, if the closing attorney is shown on your sales contract, why the difference in cost? I think you know the answer, and the same can be said about any other fees other than the 800 section fees on your estimate.

The loan estimate/cost estimate may first appear overwhelming, but I have just shown you that there are truly only three places to compare when shopping for a mortgage loan: 1. loan program, 2. interest rate, and 3. 800 section fees.

Everything else will ultimately be the same at your closing, regardless of the lender you choose. Don’t be fooled by lowball cost breakdowns.  The mortgage industry, like the real estate industry, is experiencing a slow period. Be “suspicious” of grossly different cost quotes you get from different lenders, as well as lenders who quote you a rate for a less than 45-day closing and then tell you they cannot lock the rate quoted yet. Happy shopping!

Remember… the BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.

Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!

Thank you for reading this blog. I hope that the facts and insights I share provide value to you.

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Blog post date: Wednesday, December 11, 2024