Hands On The Heartland
Checking The Pulse Of The Kansas City Real Estate Market 

The first question many homebuyers ask a mortgage lender is “what are interest rates today?”. That’s a sensible question but the process is much more complicated than just having a lender quote an interest rate. For starters, if a lender answers that question without running the borrower’s credit report and asking a few questions then the rate being given probably assumes an “A” paper borrower – which most borrowers are not. In addition to knowing the interest rate, a borrower needs to be attentive to the fees the lender will be charging as well as making a decision on the quality of the estimated figures the lender is providing.

Choosing A Kansas City Mortgage Lender

So, after the lender has pulled the borrower’s credit report and found out how much down payment the buyer will be making, the lender can provide the borrower with a Good Faith Estimate (GFE). Borrowers should look this GFE over closely to be sure the information provided includes all of the loan details like the appraisal, credit report, lender fees, third party fees, reserves, title charges, government charges, etc. Look closely at the lender fees aspect of the GFE because that shows the variable fees that a lender is in control of and plans to charge you. The fees could be called a Loan Origination Fee, Application Fee, Processing Fee, Underwriting Fee, Broker Fee, Discount Fee (to buy the interest down), etc. One lender may charge $100 for EACH of these fees while another may charge $500 for just one of the fees but charge no others. Another lender may mix it up some other way.

Don’t let yourself get caught up in how many separate fees may be present, what the fees may be called or even the individual amounts of each fee being charged. What’s important is the TOTAL amount of all the loan fees that will be charged by the lender. Knowing this amount allows you to compare one lender to another in regards to both the interest rate as well as the total loan fees. When weighing one’s options regarding interest rate and fees, generally speaking a borrower who plans to stay in a home 10 years will do better with a lender charging a lower interest rate but higher fees. A borrower planning to stay in a home 2 years will generally do better with a lender with a higher interest rate but lower fees.

As the name “Good Faith Estimate” would indicate, the document is simply an estimate of the costs the borrower may incur. They are far from being a guarantee and defining “good faith” will vary from one person to the next. This brings me to the third part of the equation – choosing a reputable lender and loan officer. Finding a lender with great rates and low fees could mean nothing if your lender blows the deal by not having the loan ready to close or if the lender pulls a huge fees switcharoo on you at closing. The more accountable the lender is, the more accurate the GFE is likely to be and the happier you’ll probably be at closing. The lender will certainly feel more accountable to you if the lender is your own bank or has been referred by a friend, family member or real estate agent.

Posted by Jason A. Brown

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