Earlier a Mortgage Porter reader contacted me regarding working with their Builder’s Loan Originator. They faxed their Good Faith Estimate to me to help review their closing cost fees associated with the rate. You can click on either estimate for a larger view. Here is the Builder’s preferred lender’s estimate 30 Year at 6.25% (APR 6.4246%):
Here is my estimate 30 Year Fixed at 6.25% (APR 6.442%):
When comparing good faith estimates:
- Make sure you’re obtaining the same lock periods (in this case, both estimates are for 60 Day Locks) and that you’re getting your estimates at the same time on the same day (I used a rate sheet from October 10, 2007).
- Add up all the costs shown in Section 800 of the Good Faith Estimate. The total cost for the Builder’s GFE is $5200 and my GFE total cost is $4332.60. This is a difference of $867.40 (my estimate has lower costs).
- Ask each LO if they will guarantee the closing costs shown in Section 800. If they don’t, ask why not and listen hard. There’s no reason a LO cannot back up the closing costs they promote on a GFE once a borrower is approved and the loan is locked.
NOTE: The Builder Lender’s APR is lower than what I’m quoting, yet my APR is higher even though my costs are lower for the same rate. This is once again evidence why you DO NOT SHOP YOUR MORTGAGE BY APR.
I’m assuming the buyer has signed a purchase and sale agreement with the Builder who is offering a $5,000 closing costs credit if the buyer works with their lender. They’re charging a 0.25% Discount Fee (shown on Line 802 of both estimates) where I would not. The buyer should ask the builder’s lender why they’re charging a discount for that rate for 60 days when other lenders are not.
When you’re receiving a credit from a builder, you certainly want to make sure that you are receiving the full benefit and that it’s not being absorbed by the lender.