November 6, 2009, Newsletter Issue #192: Mortgage Shopping Techniques

Tip of the Week

The stated interest rate of a loan is only one factor you should consider. When shopping, ask every potential source what the closing costs might be if you selected the product they offer. Find out what the cost is for each item (title search, closing, underwriting, processing fees, etc.) Find out what the points are for this loan, including whether the lender is to receive points “on the back end”, which are sometimes given by the end lender at closing.



If your prospective lender is to receive another one to two points at closing, you are paying a higher interest rate than you need to. The mortgage broker or company is “delivering” your loan to the end lender at a higher than market rate so you are really eligible for a lower interest rate. Ask for it. Ask your prospective source how long the rate quoted is “locked”. Locks come in a variety of flavors, e.g. 0, 10, 30, 60 days, etc. A rate without a lock could be useless, since it could change in the next hour. A 10 day rate is almost equally useless since your loan won’t get closed in that time period. Should you have a 30 day lock, ask the lender to guarantee that you will close in one month or that they will hold the rate or give you a lower one, should the rate decrease. A 60 day lock is one you can rely on, but get written proof from your lender that your rate is indeed locked for that time period.


Finally, do your homework. If you’re thinking of dealing with a lending source you do not know, find out what reputation they have in the industry. This is too important a decision to risk dealing with a source that has a less than stellar reputation

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