Home Page: Budgeting

Mortgage Quote

I call it the shell game. When you are shopping lenders and various loan options, don't just look at the rate and payments. The first thing you need to consider with a mortgage quote is the loan type and term. Are the terms the same? Eg. 30 Years vs. 25 Year. Is the type of loan the same? Eg. Adjustable rate mortgage versus fixed rate mortgage. You really need to educate yourself on all of the options available and decide the right choice for you before you buy a home.

Mortgage brokers and loan officers are salesmen. They will always try to provide the mortgage quote with the lowest interest rate and monthly payment to try to get your business. Buyer beware! They may include points to lower the rate (points increase closing costs), quote an A.R.M. vs. a fixed rate mortgage to lower the rate, or hide the settlement costs by burying it in the loan payments.

Closing Costs

Lenders are required to provide you with a good faith estimate (GFE) which will spell out the terms of the loan and the closing costs for the purchase of your home. The requirement is based on the Real Estate Settlement Procedures Act of 1974, (RESPA). If a lender does not provide you with the estimate or is evasive about it, do not do business with them.

After you receive the GFE, review the details and make sure that the estimates are based on actual current data. For example, a lender may not be fully up to date on the local recording fees and title charges for the particular town, state, or county. This is one reason that two lenders quote very different closing costs. I can't stress this enough - Take the time to have you lender explain all closing costs in full detail and make sure they provide you with a the high end quote so that you are not surprised when it comes time for settlement.

Wrap Up

Do not take my word for it, take the governments word and educate yourself. Your tax dollars have helped pay for the U.S. Department of Housing and Urban Development (HUD). They have a terrific web site related to Information about buying a home which includes an unbiased explanation of closing costs and other information that you should know during the mortgage quote process. Also, take advantage of a free online Home Mortgage Payment Calculator. to calculate amortization and payments. This could be one of the biggest purchases in your life. You should take the time to learn the facts and make and educated decision.