Looking to get a mortgage or refinance an existing one? If you have the credit score to make it work, you shouldn't have trouble finding people who really, really want your business. The trick is deciding who should get it.
Christopher Cruise, a mortgage trainer in Silver Spring and a board member of the National Association of Responsible Loan Officers, suggests that you look carefully at the fees the mortgage broker or lender plans to charge.
"A reasonable markup is 1, 11/2 percent for the typical mortgage of $250 [thousand] ... and above," he says. "And don't let them pad it with admin fees, doc-prep fees, processing fees. We're very creative, you know."
Determining how much you're paying in fees - upfront or rolled into the interest rate - isn't easy. But it's worth your time to hunt, negotiate and compare deals from both lenders and brokers.
"Everything is negotiable," Cruise says. "Credit report, appraisal, what are called 'junk' or 'garbage' fees, origination fees."
Look at all the lines in the 800 "block" of the good-faith estimate to see how fees under various names add up, Cruise says. Also find the "yield spread premium," often listed as "YSP POC," to see how much that will cost you.
A yield spread premium refers to a common practice in which the lender pays the broker because you've agreed to a higher interest rate than you could otherwise get. You might choose this path to lower the amount of money you'll have to cough up at settlement. But you don't want to pay top dollar on both ends, Cruise says.
Brokers have to disclose this premium. But here's the rub: You might get nothing more specific than, say, "zero to 3 percent" until you near settlement.
If you're using a broker, Cruise recommends that you keep looking until you find one willing to tell you the premium figure early on. Better yet, get a guarantee in writing that all the fees he or she has control over won't change at settlement.
Bottom line: Ask questions and don't take anything for granted. A fee might be preprinted on the sheet and labeled "standard," but that doesn't mean you really should be paying it, he says.
And remember that comparing offers by total loan costs can be risky. That's because the figure includes the prorated taxes and insurance you'll have to prepay, says Holden Lewis at Bankrate.com.
"Depending on the date that you apply and the date of the closing that you set, those numbers can vary a whole lot and make that bottom line vary," Lewis says.
Find Jamie's blog at baltimoresun.com/realestatewonk.