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Great video by Fox business on how to avoid misleading mortgage advertising.

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As most folks are aware, Colorado property values have skyrocketed this past year. For homeowners who purchased their home utilizing a CHFA or an FHA loan, this is a fantastic time to consider a conventional loan. The benefit of doing a conventional loan is to remove mortgage insurance, get rid of the 2nd mortgage and reduce your interest rate. You can also skip 2 payments and get up to $2,000 cash back at closing.

How To Shop For a Mortgage

Shopping around for the best mortgage deal can be overwhelming. We would like to explain a few things that will help you simplify this process and help you eliminate all of the stress and confusion that you may experience while comparing rates and fees with various lenders.

Where Do I Start?

As you start going through the shopping process, there may be dozens of different loan documents and disclosures that lenders may present to you. For now, you can disregard all of those disclosures and essentially focus on only one document. That document is called the “Good Faith Estimate” or sometimes referred to as the “GFE’. This document will tell you everything you need to know about the interest rate and the fees that the lender is charging you. It is the only document you will need to shop for the best mortgage deal.

If you would like to follow along, please open a PDF Good Faith Estimate in another window.

What is a “Good Faith Estimate”

The Good Faith Estimate is a preliminary estimate of all fees and loan terms such as the interest rate, term, fixed/adjustable, loan amount, etc. This document is standard across the country so Colorado residents will be looking at the same document as someone who lives in New York.

How To Read a Good Faith Estimate

The GFE is a very thorough 3 page document but only a few parts are actually important when shopping around for the best mortgage deal. 
On page 1 of the GFE, you will find the summary of your loan. This will give you the loan interest rate, the length of the loan, the type of loan(fixed or adjustable) and whether the loan has a balloon or prepayment penalty. Review the first page to make sure that you agree with all the loan terms and interest rate.

Now that you’ve compared the interest rate, we can move on to the closing costs on page 2. Line/Box 1 is the origination charge which is the fee that the lender is charging you. Line/Box 2 will show you if you’re getting a credit or paying points. Box A(adjusted origination charges) is the combination of Box 1 and Box 2. When shopping for the lowest lender fees, The “Adjusted Origination Charges” will be the number you want to compare between all the lenders. We explain further why this is important.

If you are receiving a credit/rebate, that number will go in Box 2 on page 2. That credit goes towards offsetting Box 1 and will reflect in Box A(Your Adjusted Origination Charges). IMPORTANT – If you are receiving a credit, it is possible that the credit(Box 2) will exceed Box 1 resulting in a negative number in Box A. The negative number means this loan has no lender fees plus offers an additional credit to go towards other 3rd party fees such as title insurance, etc. It's important to remember that if you're offered a no-cost mortgage, Box A cannot be a positive number. It must be zero or negative.

On the other hand, If you are paying points or buying down the rate, you would add Box 1(Our Origination Charge) plus the points/charge(Box 2). The sum of those 2 numbers is how much you’re paying in lender fees. Keep in mind that this does not include any 3rd party fees such as title insurance or escrow set up.

It’s important to note that once the GFE is disclosed to you, the lender cannot change their lender fees(Box 1 on page 2 ). The reason these lender fees must remain the same is to protect the consumer from bait and switch tactics. Meaning, if a lender promised you that they will charge you a certain origination fee, they cant go back a week later and raise that fee.

Why is the Origination Charge(Box 1) not so important?

Let’s say that mortgage company ABC is charging you $5,000 in Box/Line 1 and mortgage company XYZ is only charging you $3,000. Although it would seem that company ABC is charging you more money, you have to compare the credit and/or charge(Box 2 of GFE) from both companies. Company ABC may be giving you a credit to offset that $5,000 but company XYZ may not be giving you a credit to offset their $3,000 charge. This is why you should only compare the adjusted origination - Box A which can be found on page 1 & 2.

When shopping for a mortgage, you are comparing only 2 things – the interest rate and the ADJUSTED ORIGINATION CHARGES(Box A). All other numbers/estimates on the good faith estimate will essentially all be the same with every lender.

To sum things up, don’t let yourself become overwhelmed when comparing mortgage quotes but just focus on 1)Interest Rate and 2)ADJUSTED ORIGINATION CHARGES. The lender with the lowest ADJUSTED ORIGNATION CHARGES and interest rate is offering you the best deal.

Keep in mind that on a refinance you're interest rate and Box 2 of the GFE can fluctuate until you request your loan officer to lock the loan. On a purchase, in order to lock a loan and get a true good faith estimate, the applicant must be under contract.

New Review for Trust Home Loans

Fr.George Shawareb — Igor you have performed a miracle you were able to get it done while others failed I appreciate your hard work and honesty, now I know what it means to deal with someone who knows the business as well as you do, I will refer you to everyone I know not just because you helped me but because I care for my friends and family and I want them to be taken care of the right way.
thank you and God bless you Igor.

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Thanks Darby!

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