Dear Sherry: I’m purchasing a new condo and I’m really having a hard time comparing the different good faith estimates that I’ve received from various lenders. Why isn’t there an identical form every lender fills out with charges, similar to tax paperwork?
Signed: Confused and Frustrated.
Dear Confused and Frustrated: It’s true, it can be confusing. But every potential charge you see on those estimates has a number assigned to the charge. That’s how these estimates are put together. However each company uses different loan processing software, and so each has a different look or feel to it. But looks aside, they all have to conform to the same standard.
For example, the “800” section is reserved for lender charges – and that’s where you compare apples with apples i.e. one lender to the next. Line item 801 is always for an origination charge, item 802 is discount points, 803 is for the appraisal and so on. You might think that you can’t simply ignore all those other Recording fees or Escrow charges – but when comparing lenders, you should. Because your lender has nothing to do with your escrow charge or your document stamps, but they are still required to disclose those fees to you upon application or at your request.
Some lenders do have a lot of additional fees and some don’t. The final trick in evaluating a good faith estimate is to also pay attention to “missing” fees or the names given to a particular lender charge. If a charge is not there it doesn’t mean you’re getting a discount on anything or having a fee waived, it could be made up for with another fee instead. These are you “junk” fees. In addition, loan officers can intentionally or mistakenly mislead a consumer when completing a good faith estimate by “low-balling” certain non-lender charges (such as attorney fees or title insurance) or adding additional fees that won’t actually appear on a final settlement statement.
In conclusion, pay no attention to what the fees are actually called, but instead pay attention to the total of those fees. A loan officer can tell you, “Hey, I’m waiving our $450 processing fee and our $250 commitment fee for you!” but that doesn’t mean they are going to be $700 less than everyone else. He’s simply “charging” then “waiving” a fee. So pay attention to the bottom line.
After all, is anything really free?
Sherry Graziano is a Mortgage Adviser for Coldwell Banker Home Loans and has been assisting buyers for over 5 years. She currently specializes in condo mortgages. (I happen to know she’s also a brand new mum. Yay! Congrats Sherry! Ed.)