Tag Archives: banking

How to bargain shop for mortgages

Shoppers, I bet many of you scoured the Sunday ads and bounced to several stores for deals over Thanksgiving weekend.

What if you applied that same effort and vigilance to shopping for a new home loan or refinance? That same attention to detail could translate into hundreds to thousands of dollars in savings over time.

“People think nothing about going to many different stores to buy a toaster or oven or dishwasher,” said Norma Garcia, attorney at Consumers Union, publisher of Consumer Reports magazine. “They just don’t shop for (home) loans the same way they shop for other products, but they ought to.”

Consumers likely are more comfortable comparison-shopping for microwaves than mortgages because the home-loan process can be cumbersome, with reams of paperwork, unfamiliar jargon, and of course, the rush to close and move to a new place.

The U.S. government is working to make the process easier. Since May, officials have been trying to simplify and combine two required forms that show would-be borrowers their final loan terms and costs before closing. The “Know Before You Owe” campaign, spurred by sweeping financial reforms in 2010, has produced two drafts of the merged documents that are still in testing phase…

FORMS TO KNOW

This gives you an approximation of what you may owe at closing. It lists the basics including loan amount, interest rate and potential penalty costs. The form also shows you different loan scenarios to illustrate whether it would make sense, for instance, to buy points upfront to reduce your interest rate. (One point typically equals 1 percent of the loan’s value, or $1,000 for each $100,000 borrowed.) Click here to see the whole form

 

FORMS TO KNOW

You get this at the closing table. The form lists every single expense and credit involved in the transaction. Click here to see the whole form

 

You also get this at closing. The document breaks down how much you will owe in a different way. Perhaps the most important detail is the annual percentage rate, which rolls in all of your costs and is defined by HUD as the “true cost” of a loan. Click here to see the whole form

TO-DO LIST BEFORE CLOSING

• If there’s a line item you don’t understand in any of the forms, ask about it.

• Scan for hidden costs. Third parties get proceeds from loans in the form of fees and commissions, said Norma Garcia, attorney at Consumers Union, publisher of Consumer Reports magazine.

• Know who’s going to service your loan. The holder of your loan can sell the loan to anyone, but they have to disclose the percentage of loans that are sold. “If you choose to go with that lender, just know that may not be the person you’re dealing with down the line,” Garcia said.

• If you sense your lender isn’t being upfront or answering your questions, find someone else. It may take interviewing two to three people to find the right lender.

• Get a second opinion on your loan documents from HUD-approved counselors at little or no charge. But be sure to do this before closing. For San Diego, you can call the Housing Opportunities Collaborative at (619) 283-2200 or (800) 462-0503. Someone will direct you to the right agency.

• Don’t sign anything unless you understand it.

Read the whole article by SignOnSanDiego.com here: “How to Bargain Shop for Mortgages“.