Don’t we wish it were an Easy Answer
Wouldn’t it be nice if we could know for certainty we have a good interest on the largest purchase of our lives. There are many factors that come into play when determining if your interest rate is good/fair. Here is a list to show you a few:
- Credit score
- Type of loan (conventional, FHA, VA, cash-out refinance, rate and term refinance, ARM’s…)
- Type of property (house, condo, manufactured home…)
- Loan Amount
- Purpose for loan (primary home, rental, 2nd home…)
- Down payment amount
- Price of the property
- Origination charges the lender has
- Points (usually a cost to lower the interest rate)
- Lender credits (usually money received for accepting a higher interest rate)
- If there is lender paid PMI
- State the property is in
- Even the Zip code you are buying or refinancing in are all variables that come into play
Keep in mind that just because one has a low interest rate, that does not necessarily mean that the loan is fair. Mortgage fees and points can far out weigh any interest rate making a mortgage unfavorable. In reality there is only one way to know for sure if your proposed mortgage is fair. That is with an independent mortgage loan review that analyzes the quality of your mortgage Loan Estimate your lender will give to you.
It is all about the Loan Estimate
The mortgage Loan Estimate is a standardized 3-page document that your lender is required to give to you once they have received 6 key pieces of information. Those 6 key pieces of information are:
- Your name
- Your income
- Your social security number to pull credit
- The property address
- An estimated value of the property
- and the desired loan amount
Mortgage lenders are not allowed to require you submit any documentation to verify such said information. Meaning before they send you a Loan Estimate they cannot require you to submit bank statements, a purchase contract, pay stubs, etc… Because of this it benefits a consumer greatly. It allows a consumer the ability to quickly compare Loan Estimates from multiple lenders without being bogged down scrambling for paperwork. Once a lender has those 6 pieces of information they must provide you a Loan Estimate within 3 business days.
Two other things that may better your loan
Aside from purchasing an independent Mortgage Review of your Loan Estimate you can do two other things that may better your loan.
- Compare other lender’s Loan Estimates
Negotiating can save you some money. Simply asking them to wave a fee is one way. To be specific the fees that are negotiable are under section A of page two of your Loan Estimate (Origination Charges.) It can be difficult to know if a fee is high or if there are excessive fees. However ‘playing hard ball’ by requesting a fee to be removed is one way to get the upper hand when negotiating your mortgage. Therefore, be careful that if a fee is removed the interest rate other origination charges have not increased on the Loan Estimate.
Comparing lenders can work by comparing multiple Loan Estimates. Do you notice a theme? Again, it is all about the mortgage Loan Estimate. Because of this you may really need to educate yourself to be able to compare apples to apples. Taking into consideration the interest rate, origination charges, points, any lender credits, and lastly the APR. Most importantly the APR (annual percentage rate) can be used to compare the decency of a loan over the course of the whole term.
Conclusion: How to Help Ensure You Receive a Fair Mortgage Loan
In conclusion, paying for a third party service to analyze your mortgage Loan Estimate will ensure you get a fair deal on your mortgage. It will help you in your negotiation knowing if the interest or fees are high and how to best proceed. It will save you the time it takes and the education needed to compare multiple Loan Estimates. The ultimate take away is that not all mortgage loans are they same. There is a large variance among lenders, but with some elbow grease of your own or the use of a Mortgage Loan Review, you can save yourself thousands in needless interest.