Ryan's Mortgage Blog:

When receiving a quote from a lender or broker you should also receive a Good Faith Estimate (GFE), if you don't get one, you need to ask for one. The GFE shows all the "estimated" fees related to your loan. I say estimated because it can and will change, and the fees are not legally binding. They can change because many parties are involved (Title company, government, appraiser, etc...) and sometimes there are miscellaneous obstacles like liens that need to be paid off or something else fun you didn't know would come up.

Several fees are based on the price of the home or loan amount, and brokers/lenders change very different amounts for their time, so it is hard to estimate how much your closing costs should be. So just because your neighbor got charged "x" amount from XYZ company, doesn't mean you will too. BUT you need to work with a broker that will explain all the fees and not hide any of them. If you are signing the docs and see fees you were unaware of, you do not have to sign. Make sure to check these fees the day of closing every time even if the GFE looked good!

Later in the week I will post an estimated list of fees that you could see on your GFE. As a loan officer, I like to give a cushion of more than less, meaning I estimate things as costing a bit more than they should so when it comes time to close you may not have to pay as much, instead of finding out you owe more. As you will also see, many fees are out of the lenders/brokers hands such as (government, appraiser, escrow, notary). So it is important to find a broker who knows which companies to use.

The APR (Annual Percentage Rate) is supposed to be the true cost of the loan, and is supposed to help you compare loans between lenders. It combines the interest rate plus the estimated fees you should be charged. It has good intentions, but can be very flawed for too many reasons to list. So let's say company AB is advertising a 30 year loan at 6% interest and 6.25% APR, and company XY is advertising same thing for 6% interest and 7% APR. According to the figures company AB should have cheaper closing costs. BUT the problem is there is no exact mandated calculation on how to determine APR, the law just states it needs to be presented, and most times the APR is probably wrong. It also doesn't tell you if the loan is fixed or adjustable, or if it has any kind of prepayment penalty. So don't get too tied up into finding out the APR, I'd rather see a GFE any day.

For free, no obligation rate quotes feel free to contact me at RBaker@PeregrineLending.com or 805-540-0866.