Dynamics of Picking the Best Loan Quote From Competing Lending Institutions

When looking for a lender, do not base your decision on the lowest payment only. In the majority of good faith estimates provided by lenders, all FHA & VA mortgages, the estimated property taxes and homeowners insurance are included. In many cases, but for if you inform all lenders the precise figures they are estimates. Realize that taxes are accessed by the property appraiser and insurance by the provider of your choice not by the bank and their approximations will vary, sometimes greatly. When comparing payments , only consider the principal and interest.  Although what you should focus on is the rate vs. to the cost to close. Cost to Close have 2 parts closing cost and taxes and insurance or prepaids. When comparing, do not consider the paid in advance figures as they not determined by the bank and can vary due to being approximations and by estimated date of closing. For instance if you are looking at a home in Nashville, TN,  lender A provides a  you an estimate for a closing in Apr. and lender B in May, lender B’s prepaid estimate will be lower as one less month is required for tax escrows. Also locate the owner’s title policy, title insurance, and closing fee and any transfer or HOA fees  to make sure they match up. These are not assessed by the lender but the title company choice and home owner’s association. If lender A has a lower interest and less closing cost, choose lender A. If Lender A and Lender B have identical rates, choose the lender with lowest closing cost. If lender A has a lesser rate but higher closing cost, look at lender A’s quote for either origination fees or points charged to borrower.  Origination fees or points are charged approximately  1 point =.0125% off your interest rate, and 1 Point cost you 1% of the loan amount. For instance if lender A charges 1% origination fee and 1%  buy down = 2 total points vs. lender B charges 0% origination fee and 0% buy down = 0 total points, lender A’s rate should be 1/4% or 0.25% lower than lender B, but lender A’s closing cost will be 2% of the amount borrowed higher.

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