When Lenders Compete ... Is That the Way To Go? - An ongoing lawsuit against a website that allows advertisers to post their rates, suggests that when lenders compete, you still may not get the best rate.
The lawsuit alleges that lenders post rates so low they cant honor them. Then when the borrower is committed to the loan, they switch him or her to a higher rate. That higher rate is often worse than the honest rate offered by other lenders.
Most websites that advertise the offer of "let lenders compete for your business" or anything similar to that don't necessarily guarantee that you are going to receive the lowest rate or the best deal. By submitting your information to these types of websites or companies you are really submitting your information to a company who provides your information to the mortgage companies who will pay them the most money. Therefore, the companies that are buying your information from these lead companies have to recoup these costs somehow and they will generally do that through "junk fees" or higher interest rates than what you might actually qualify for. You should always use a mortgage professional/company that comes highly recommended or someone you feel you can trust to provide you with a great deal. Mortgage brokers understand that you are looking for the best deal possible. They realize you have many, many choices as to whom you want to work with and that they are competing against all of them as well. Therefore mortgage brokers can be a great source of finding a top notch deal.
A good mortgage broker will match your needs to the right mortgage program. Sometimes the lowest rate is not the best deal - other factors such as no pre payment penalties and lower up front costs can make one program a better deal even if the rate is slightly higher.
Do your own comparison shopping, some that say they will do it for you and then present you with what they say is the best offer, don't always do what they say...
When looking for home financing on the internet, be sure to deal only with mortgage companies that directly handle your loan application. Websites advertising having four lenders competing for your business often sell applicants' financial information, also known as "leads", to multiple mortgage companies and "leads" brokers. Loan applicants who submitted their financial information on those websites often find themselves overwhelmed by a sea of telemarketing calls from different mortgage companies for months to come.
You have to make sure you're comparing apples to apples when you do this..Unless you have a long discussion in regard to income, assets, credit, short and long term goals with each broker and hang up knowing exactly what program you're talking about, it will be impossible to get a good comparison...I can tell you this, the lowest rate out there is only on a program that isn't the best program for over 90% of borrowers, so just shopping a rate may end up costing you more...Find out what program is going to help you realize your financial goals, understand the program and how it's going to get you there, take nothing on faith...It only costs you time to get the best deal!
Most advertised rates are either for perfect credit, and low LTV loans, or for Pay Option loans where paying 2% will actually eat away at the equity of your home. I would be weary of some exremely low interest internet advertising, and work with a professional that will be upfront and honest and not spit out numbers at random until they know your full situation.
Some websites actually resell your information to multiple mortgage brokers. Keep in mind when multiple mortgage brokers run your credit you are hit with multiple inquiries which could lower your actual FICO score. Lower scores limit your ability to qualify for certain loans and also may increase your interest rate which could cost you thousands of dollars over the life of the loan.
The truth is, a knowledgeable mortgage broker who is highly respected and experienced can get you a great deal, without any of the "bait and switch" tactics that are sometimes employed by unknown mortgage companies.
Understanding a Truth in Lending (TIL) - The Truth in Lending(TIL) is used to help compare different types of loan programs. Your loan APR is listed on the TIL, although your mortgage payment is not based on the APR, it does give you the total cost of the entire loan package. The TIL will also include your note rate, a brief payment schedule, and the loan term youve been qualifed for.
The TIL is also where you can see if your loan will have a prepayment penalty. There is a section towards the bottom of the page where you will see a check box for "will not" or "may" have a prepayment penalty.
The TIL will also include the finance charge and the total dollar amount you will pay for the entire loan.
