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What to look for in GFE

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I received few GFEs from lenders and I am just not sure what to look for or how to compare them. How to decide which one is better than other....Please advice...

Thanks for your time.

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October 11 - US

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GP46
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GP46

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Clay,

5 years of MMI is included in the APR? This is in addition to the upfront 1.75% MMI?

MMI is FHA's version of PMI correct?

GP

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October 16

Dana Kolodney, "Dana Kolodney"
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Dana Kolodney, "Dana Kolodney"

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The easiest way to compare GFE"s is to compare lender fees to lender fees. All the rest of the the fees on the GFE are from 3rd parties such as the "Governor", Local taxing authorities, the appraiser, the surveyor, the closing agent and etc... Your lender does not control 3rd party fees. However, originators understand that you compare bottom line to bottom line. So they may underquote 3rd party fees inorder to achieve a better bottom line. You have the right to shop for third parties such as the surveyor and closing agent.

Once again, when choosing a lender compare only lender fees to lender fees based on the interest rate quoted.
Rate is a secondary factor when choosing a lender. It is not the most important item that you should be looking at. The most important thing you should be considering when choosing a lender is:

# 1 Experience and knowledge. Declined loan means no house and lost fees.
#2. Trustworthy. Placing you in the best loan product that meets your needs.
#3. Local underwriting and processing. (local to the loan officer, not you)The loan officer needs to stay on top of your file and have a repoir with their underwriter and processor.
#4. Knowledge of federal tax laws and how to maximize these benefits to you.
#5 Rate and fees.

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October 12

Clay Branch, "Georgia Loans"
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Clay Branch, "Georgia Loans"

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Steve, if your example conv APR is going to be 5.019, then that LTV is 80% or less, and the FHA APR will be 5.488 due to 5 years of MMI.

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October 12

Steve Heaney, "SteveHeaney"
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Steve Heaney, "SteveHeaney"

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APR is calculated by subtracting the "Paid Finance Charges" from the loan amount and then dividing it back by the rate and ammortization period. The 1.75% MIP (in most but not all) is included in this and is typically thousands of dollars making the APR any where from .1 to even .5 higher than the same spread on a conventional loan. I just was working on a comparison and a Conv and an FHA both at 4.875% with the same "other" costs notwithstanding the MIP were 5.019 and 5.172 APR respectively.

APR is really just one of the items to look at for suitability. What is important to you is the magic question. Payment only, Rate only, Long term ROI, short term cash out of pocket. Here is where you should put a quote on Zillow and get a relationship with a professional that you can trust in your area to walk through the analysis.

Lending is a moving target right now and we in the business scamble to keep up with the changes. I teach loan originators and frankly a huge percentage of people in the business do not understand APR. Look for a Zillow lender in your area with good ratings

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October 12

Joe Cafiero, "jcaf1918"
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Jerry;

Because the UpFront MIP is factored into the APR, you will see a bigger difference between the APR and the rate, then a conventional loan with similar "800 fees"

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October 12

JSalz
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Steve,

Can you explain how an FHA loan has a "greater spread"?

Also if the upfront FHA fee.. the 1.75% or whatever, is that fee reflected in the APR?

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October 12

-Penner Law Firm - -Hartford Title-, "pennerlawfirm"
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-Penner Law Firm - -Hartford Title-, "pennerlawfirm"

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Beyond what others said, watch out for them trying to fudge numbers by changing the days of interest charged or the estimates on lawyers fees, title insurance, title search, and other items that they (probably) have no control over.

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October 12

Steve Heaney, "SteveHeaney"
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This is really what APR is supposed to be for, accurate comparison of the true cost of a loan. I say "supposed" because it is sometimes very confusing and easily manipulated by some either by placing fees in the wrong place or "bundling" services in an area that do not show up in APR. They are right, focus on the 800 HUD lines but if they are accurately documented you should be able to look at the APR number and determine the better loan. The key is in getting an "apples to apples" GFE. If you are looking for a 30 year fixed, have every one give you a GFE and TIL not just a quote. If all the rates are the same, the APR should reflect the costs for each lender and the lowest APR would be the better loan (in theory). If you have one quote at 4.75% with higher fees, one at 4.875% with middle fees and one at 5.0% with lower fees, in theory all three of these shold be pretty close in APR and the lower APR should be the lower cost loan. This is all theory and is based on everyone accounting for costs the same way.

A good way to get a handle on APR would be to have a trusted source give you three different GFE's, one at "Par", one with a discount/buy down and another with reduced closing costs and a slightly higher rate. From the same lender using the same costs, you will see the impact on APR as a comparison tool and how it is impacted.

Regrettably, APR is not the awesome comparison tool that it was imagined to be when invented because of the way it can be manipulated. Also, it is very confusing if trying to compare an adjustable rate mortgage. It is also very different when looking at an FHA loan and has a much greater spread even if the FHA loan is a better loan for you.

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October 12

Timothy Sutherland, "SunTrust"
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The flaw in the argument to look at the 800 line items fees is that some of the fly-by-night lenders are burying their (800 line items charges) down on the 1300 line items.

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October 11

loansbytracy
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@ Martin Great answer - I second that!

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October 11

Martin Wareing, "Martin Wareing"
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If the rates were the same, compare the LINE 800 items.. If they are not, get the rate you want and have them all resubmit their costs according to that rate... revert back to 1st sentence... Line 8oo items: The costs that the LENDER and Originator "charge" to arrange your loan. All other fees are not charged by the lender and therefore are not controlled by them either (meaning they will all be the same at the closing table).

If 1 of the GFE's is from a local (liver person) to you... and it is the best or very close to it... strongly consider that person... 1) you can go "see them" if you need to and 2) that person will "spend" some of his/her wages locally in your local economy... It is the financial circle of life.

Good luck.

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