In all my years as a mortgage broker I don’t think I’ve ever talked to a client that understood the answer to this question.

Imagine being able to “really” compare lenders and understand the process you’ve initiated when looking for a home mortgage loan or even a refinance.

Here are 4 very specific tips (no fluff or definitions) that if followed will put you in control of your interest rate quotes.

When asking for mortgage interest rate quotes, be sure to compare apples to apples.

The way to do that is to ask for specifics such a loan type, points your willing to pay, only state lender fees, disclose line 824 of the good faith estimate, etc.

Don’t just ask for the lowest interest rate. You’ll get answers like 1%, which may be true but not on the loan type you really want such as a 30 year fixed.

If a client called me and said…

“I would like a refinance rate quote on a 30 YEAR FIXED RATE, ZERO POINTS, showing only LENDER AND BROKER FEES with LINE 824 of the good faith estimate reveled”

…I would probably fall out of my chair.

I can quote the rate on that type of request in a matter of minutes. It avoids an hour long conversation where I try to help them determine their loan type, purpose, how many points (or lack of) they want to pay. When the loan officer has to educate the borrower, the borrower always loses because inevitably the borrower gets confused and makes a bad choice.

Know your mortgage products such as a long term fixed rate or short term adjustable rate. Know the options available such as interest only or a lower rate if you can accept a 2 or 3 year pre payment penalty.

Understand the “points” game. It’s simple actually – you pay interest up front and you get a lower interest rate. Don’t pay points and get a slightly higher rate or accept a higher rate and take the rebate and put it toward closing costs. However when comparing quotes – make sure all are the same points charge. You can also pay “discount” points and pay to buy the interest rate even lower.

Compare only lender and broker fees. Your title insurance, local taxes and appraisal fee will be very similar and lenders and brokers don’t control those fees so comparing is a futile effort – especially when most initial charges are estimates anyway.

And finally, line 824 on the good faith estimate is typically not shown however it acts as a check and balance in ratio to the points you pay or don’t pay (that’s why you ask for it, and you have a right to know it). Here’s the simple use of line 824 – if you pay one point, line 824 would not typically have a rebate, at least not a significant one. If you pay zero points, there should be a rebate on line 824 (which is the brokers commission), and if you pay discount points to buy the interest rate lower then there should be no rebate. These are a good rule of thumb and don’t apply 100% of the time but more like 95% of the time.

For example; if you are willing to pay one point to get a lower interest rate then line 824 should not have a rebate to the broker because you are already paying his commission. If line 824 does have a point included also then typically the broker/lender is double dipping and you might as well know that now instead of at closing where line 824 on the good faith estimate is “required” to be shown to you.

My point here; get educated on the process and start off with asking for specifics – you’ll be way ahead of the game if you do and you’ll be able to weed out the bad apples (misleading rate quotes) better than the average Stupid Home Owner.

Other Resources:
[tag]Good Faith Estimate[/tag]
Best Refinance Plan