When you need a mortgage – whether to buy a house or refinance – what do you do? More than likely you jump online and check out competing quotes on sites that let you compare multiple offers, including interest rates, annual percentage rates and monthly payments.
That’s smart. But there’s a problem. From the information presented, you often don’t know enough about how much competing lenders intend to charge you in loan fees – origination, underwriting, processing, and various others including so-called “garbage” fees – until you actually apply and see your good-faith estimate several days later.
These fees are supposed to be woven into the APR. But sometimes differences in APRs that appear trivial – a few decimal points – can significantly affect your payments over time. Worse yet, you usually don’t know how these fees will affect your total payouts.
But now there’s a way to squeeze more information out of what’s displayed online – before you hand over your Social Security number, property information and credit details to any lender. Best of all, it’s free and has no commercial ties to banks, investors or anybody else who’s got money to lend.
It’s called the Loantech “My Loan Cost Calculator” (www.loantech.com). Here’s how it works. Say you’re shopping for a $300,000 fixed-rate 30-year mortgage. You’ve got three competing offers from lenders online that look pretty good: Lender A is offering 4 percent, a monthly payment of $1,432 and an APR of 4.055 percent. Lender B is offering the same 4 percent rate and a $1,432 monthly payment with an APR of 4.191 percent. Lender C quotes 3.875 percent with a $1,411 monthly payment and an APR of 4.042 percent. These are actual quotes of lenders pulled off the widely used HSH.com mortgage shopping site May 22.
The payments and rates are identical from two of the three and the APRs don’t look all that far apart. How to choose which is best?