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UP2 Shopping for the Best Deal

Having culled through the available lenders and narrowed the list to a set of local favorites that provide online price quotes you must now attempt to choose the one that offers the best rate/pricing combination. If you’re not familiar with the relationship between rate and discount points (and premium) you should take a minute to read AmeriFund’s Guide on Rates, Points and Costs. You should also read our Guides on Understanding the Good Faith Estimate and Annual Percentage Rate. Having acquainted yourself with a general understanding of how mortgage rate pricing works and how to compare the cost estimates you will be provided by lenders you can proceed to compare the offers of various lenders.

Compare apples to apples. The first rule in comparing quotes is to get quotes at identical interest rates (called “coupons” in the mortgage industry) from the list of available lenders.  You can’t compare one company’s 5% quote to another company’s 5.25% quote.  Doing so is, quite simply, like comparing apples to oranges.  If you want to get quotes at two or more different rates, then ask for multiple Quotes or Good Faith Estimates from each lender.

Communicate the details of your transaction. Make sure you explain in detail your transaction to the loan representative with whom you’re talking or corresponding.  Pricing sometimes varies according to loan amount, loan-to-value ratio (LTV ratio), credit scores, occupancy types and other factors.  A seasoned loan professional should, in fact, ask you all these questions prior to providing a quote.  Unless the loan consultant has asked these types of questions you should be extremely wary as they are essential to providing an accurate quote.  I would even suggest preparing a document that sets forth all of the details of your transaction that could affect pricing and then provide that to the lender as a basis for you quote.  If you’ve taken the steps set forth in the article “Before you Shop for a Mortgage” then you’ll have all the key elements required to get an accurate quote.

Obtain a Good Faith Estimate or a Quote with line numbers matching the GFE. Obtain a Good Faith Estimate of Settlement Charges (“GFE”) from each lender for each rate (“coupon”) that you are considering then group them by interest rate so that you are comparing the same rate for each lender. Any lender worth dealing with will provide a GFE or a Quote with ELEVEN line numbers matching the GFE format, and most importantly with a Block A.  Block A on a GFE is the adjusted origination charge.  It takes into account all compensation paid to the lender and/or loan originator adjusted by any discount points you pay or credit you receive that offsets cost at that particular rate. Read our Guide to the Good Faith Estimate to understand the importance of Block A and how you can easily compare quotes between lenders if you have a quote that contains a Block A.  If you receive a “Fees Worksheet” or a quote in some other format that does not have the eleven line format of a GFE ask the originator to provide the quote in a GFE format.  If they refuse to do so, refuse to deal with them. It’s that simple.

By obtaining all quotes in a format that corresponds with the eleven line GFE format (and that contains a Block A) you will easily be able to compare quotes.

As previously mentioned, regardless of the format of the quote, it is not worth the paper it is written on if the originator providing the quote is playing the “bait and switch”.  Having narrowed your search initially to reliable mortgage originators you can feel fairly confident that a quote you receive can be compared