If you are out shopping for a new VA loan, or any other mortgage for that matter how do you know if you are getting a good deal or not? You know how you get a good deal with a mortgage by comparing apples to apples or comparing good faith estimates to good faith estimates.
The good faith estimate spells out consumer paid fees versus lender paid fees, origination fees, discount points, any third party fees, and the prepaids or escrows. Along with your good faith estimate you will want to ask for a truth in lending statement or ask about the APR or annual percentage rate.
Once you get all of these in hand you want to compare them from three different loan officers that you call to talk to about getting a loan. In order to know what you’re looking at you should have a basic understanding of some of the mortgage terms you will come across.
Let’s first talk about the APR. In mortgages, the APR is a bit tricky to understand just know that it will be higher than the interest rate that you were quoted. In the event that you’re doing a VA loan and you are looking at super low VA rates, you will also see a corresponding low APR that will be slightly higher than interest rate you were quoted.
Origination fees – origination fees are fees paid by you or the lender to your mortgage company. This is how your loan officer makes money they get paid origination fees. There are two types of origination fees consumer paid or lender paid. Your loan officer can only get paid from one of these two sources.
Discount points – discount points are fees paid to your loan officer from the lender for the interest rate that they sell you. Loan officers are given wholesale rates from their lender’s and they can either sell you wholesale rates and charge you up of the to keep the rate down or they can sell your higher rate to keep your fees down. It’s rather simple. You just need to understand that that is what is happening.
Prepaids and escrows – prepaids and escrows are the same no matter which mortgage company you use. Real estate taxes, title insurance, attorney fees, prep fees all of these fees are basically the same between any lender. Sometime these fees are negotiable depending on who you go through and sometimes are not you’ll just have to ask.
This covers some of the basic information you’ll need to shop for new VA loan or any mortgage for that matter. Just keep in mind if you have questions make sure you ask them. Your loan officer cannot answer you unless you asked the question.