Shopping for a mortgage can be a process full of formidable obstacles.  Mortgage lenders do not make it easy to understand the full nature and cost of a mortgage transaction.  It should be a simple comparison shopping process where one compares all of the available rates and picks the lowest one.  But, as veterans of mortgage shopping can tell you, getting a true “apples-to-apples” comparison with which to make and informed and balanced choice can be confusing and frustrating.  Having a well-informed consumer should be a good thing for mortgage lenders, but for the most part, a well-informed borrower is not a mortgage lender’s ideal customer. It doesn’t have to be that way.  In this section, you will find the correct tools and methods to find out the answers to simplify the complexity of the process and allow you to make an informed decision.  Be in command of your decision – follow these steps in creating your plan of attack.

Know what you are looking for. 

Which mortgage program best suits your needs?  Define for yourself the level of rate security and loan term that you need for your particular buying or refinancing situation.  In doing so, you will know what kind of “apple” you are shopping for.  Click on our Loan Programs section to help you determine which loan program will serve you the best.

Know the true cost of the loan (Rate+Fees=True Cost). Lenders have many different ways of disclosing the true cost of a loan.  The rate a lender offers is only one part of the equation to finding out the best deal.  The confusion that is common to consumers is how to accurately compare costs from different lenders expressed in different ways.  Remember, although lenders’ rates may change every day, the lenders’ fees do not. 

Know what the lenders “Lock-in” Period and Policies are.

 Many lenders will advertise rates with very short lock-in periods.  The rate may be attractive, but if you don’t have enough time to process and close the loan, what good is it?  At Coastal, we typically lock loans for 45- day periods. That length of lock security assures you and us that you will have more than adequate time to process, underwrite, and approve your loan.  With most lenders, once your lock runs out you are subject to re-locking, possibly at a higher rate than the original lock.  Also, with Coastal Mortgage, you can lock-in your rate and program at the same time you apply on-line for your loan, so that the rate you see is the rate that you get.  Other lenders will not allow you to apply and lock-in your rate at the same time.

Now, let’s look at the breakdown of what closing costs are.  The four types of fees associated with a mortgage transaction are:

Origination fees and discount points – A 1% origination fee is one percent of your loan amount.  To illustrate, on a $100,000 loan, a 1% origination fee is $1,000.  Discount points are also expressed in percentages.   For example, a 1.50% discount fee on a $100,000 loan would be $1,500.  Always convert the lenders’ percentage of origination and discount points into dollar amounts to compare the costs more accurately.  Should you pay discount points to lower your rate?  Click on this "Should I Pay Points" calculator and see.

Credit Report, Appraisal and/or Application Fees– Although these fees-for-services do not vary greatly from lender to lender and are generally paid at application, be sure that the fee paid is for the credit report and appraisal fees and is credited to you at closing for payment of those services.  Beware of the “application fee” that is charged in addition to the appraisal and credit report fee. At Coastal Mortgage your application fee pays for the appraisal and credit report and is credit towards those costs at closing.

Miscellaneous Lender Fees (The Junk Fees):  These fees go by many names including underwriting fees, document preparation fees, tax service fees, processing fees, courier fees funding fees, or wire fees.  This is where most lenders disguise their fees.  When comparing lender to lender to who has the best deal, you must consider not only the rate, but the lender fees (some lenders charge up to $1200 per loan in various fees – watch-out and compare).  Only when you add all of these possible fees up and compare them side by side in connection with the rate offered can you get a better picture of what the true cost of the loan is.  Coastal Mortgage’ s lender fees total $325. 

Settlement, Title, and Closing charges – These are fees paid outside of the lender to attorneys, title companies, or escrow agents that include the costs of title searches, surveys, pest inspections and fees to close the loan.  These fees should not be included in comparisons of lenders since they are fees-for-services outside the lender.  Remember that they still are a part of total money needed for closing.

Prepare an “apples-to-apples” comparison chart to accurately compare lenders’ rates and costs.  Compare not only rates but also lenders’ fees, lock-in periods, and service-related costs to give yourself an accurate yardstick to measure true costs.  Now, you will know whether that lender with the lowest rate actually has the best deal for you.  It is not uncommon for lenders with low rates to have very high fees associated with processing and closing a mortgage loan.  The higher the fees, the less attractive that low rate actually is.