Interest rates and closing costs can be directly related. With lenders trying to capture a greater share of the market, some will advertise extremely low interest rates. As a consumer, you need to remember that nothing is free. If it sounds to good to be true, it usually is. The surest way to identify how a lender can be offering such a good deal is to ask your loan officer for a Good Faith Estimate (GFE) of closing costs. The only way a lender can provide a lower than normal market rate is to charge the borrower upfront points.
If a lender is charging these fees, they will be identified on the GFE as an origination fee, broker fee or discount points. Depending on the size of your loan, this can be a considerable amount of money. For example, if the rate is about .25% less than any other lender, you are probably paying 1 point (1% of the loan amount). On a $100,000 mortgage, this would be an additional $1,000 above and beyond your standard closing costs.
The Good Faith Estimate is a document that every lender is required to provide to a potential borrower. The GFE will break down all the closing costs line by line, as well as the prepaid costs (taxes, homeowner’s insurances and prepaid interest). If the loan officer is reluctant or dragging there feet in providing you with a copy of the GFE, you should think twice about proceeding with that lender.Â
Sam Geraci
Hunt Mortgage
5400 Broadway | Lancaster, NY 14086
716-250-0825 ext 3123
716-632-1639 (fax)
1-800-433-8373
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