Robert Cunningham HunterMaclean
Interest rates on home mortgage loans remain low (especially if you are my age and at one time thought a low double-digit interest was good), and lenders want your business.
As with any consumer product, informed shopping can save you money and put you in control of decisions. Regardless of the type of mortgage loan you are considering, lenders are required by federal law to provide certain information. The goal is to aid your comparison of loans offered by different lenders and to give you an accurate projection of closing costs and out-of-pocket fees required to move into a new or refinanced mortgage loan.
Truth-In-Lending disclosures (TIL) and Good Faith Estimates (GFE) are tools at your disposal. A TIL will state important specifics and the total cost of the loan offered, taking into account the projected interest you will pay over the life of the loan and the closing costs retained by the lender, which you pay when the loan papers are signed.
This is valuable as one loan may carry an attractively low interest rate, but have relatively high closing costs. Another loan may have a higher interest rate, but lower closing costs. A TIL will tell you the total cost of both loans, expressed as an annual percentage rate of interest (APR). This APR will be different from the interest rate on your loan.
Within three business days after you make an application for a mortgage loan, the lender should provide a Truth-in-Lending disclosure to you. Making an application does not obligate you to close the loan. You may apply at multiple lenders. However, you should apply for the same loan amount and project the same day of the month for closing. This will insure the TILs you receive are all “apples” or all “oranges” and make the loan comparisons meaningful.
A Good Faith Estimate is also to be provided within three business days after your application. It will breakdown estimated closing costs into three categories – costs which cannot change, costs which may not increase collectively more than 10%, and costs which may change due to actual final fees at the time of closing. All mortgage loans have closing costs, but the amounts, and names, may vary from one lender to another.
So, whether you are buying a new home, refinancing your primary mortgage, taking out an equity loan or considering a reverse mortgage, meet with several lenders and discuss your options fully. For most of us, our home and the mortgage loan(s) we incur are the biggest financial transactions we make.
As you move through the process, an attorney and financial planner can also help you evaluate how best to use your income and/or home equity. Take advantage of advice available as well as the required disclosures. You will be a knowledgeable borrower and better for it.
Robert M. Cunningham is a partner at HunterMaclean’s Brunswick office. He can be reached at 912-262-5996 or firstname.lastname@example.org.