As a first time home buyer the whole experience can be overwhelming and scary. It is the biggest purchase of your life and most first time home buyers know very little about the mortgage process, mortgage paperwork and the real estate buying process.
When seeing the mortgage loan officer whether it is a bank or a mortgage broker you should ask for these three things to protect yourself.
- Good Faith Estimate GFE -This is a written estimate of what your closing costs are going to be. (No longer available)
- Truth – in – Lending – This is a standardized government form for the lending industry to be able to compare the total costs of the loan in terms of interest rate.
- A written guarantee from the lender or mortgage broker of your total costs
Good Faith estimate (GFE) is what it says it is an estimate. There is no guarantee that when you go to the closing table that your costs will be even close to what the estimate was. Some mortgage brokers and lenders have no ethics and raise fees and costs to make more money off of you.
Truth in Lending is a great document. It has a number on there call APR. APR is the annual percentage rate. This is the true rate you are paying when you figure in the costs of the loan. You will be paying the interest rate the mortgage loan officer said but in reality you have to figure in what the costs of the loan were too. This document figures that out. So if you have different Good Faith Estimates GFE from different lenders the Truth in lending document allows you to compare apples to apples APR to APR.
The last document you need is a written guarantee from your mortgage broker, bank, or lender of what you closing costs will be. Have them put it in writing. It should read. Your closing costs for the loan amount of XXXXX will be YYYYY dollars not including pre-paid interest, escrow set up, or tax pro-rations. By taking those three variables out of the closing costs every lender, bank, and mortgage broker should have an exact number what you are going to be charged. If they can’t give you this document then walk away. Have them sign it. Hold their feet to the fire.
By having these three documents you will have some great information you need to make a qualified decision on which lender to use.
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