My best advice for a borrower is: 'There's more to this than just the rate' and 'There can be a difference between what a mortgage person says verbally and what they put in writing'.  Some very helpful tips are spelled out below - please call me if you need any further clarification.

  First of all, shopping around for a quote requires just alittle basic knowledge - but this knowledge can save you a great deal.  There are enough reputable people in the mortgage business - but you should know how to identify them.  There are 4 basic elements that can affect the overall structure of a rate quote.  The elements are:

origination fee, prepayment penalties, lock period, and non-origination fees. 

So beware.  If someone out to mislead you, they're counting on your enthusiasm 

about the rate, and that you won't ask for a breakdown of all categories involved.

A WORD ABOUT 'POINTS' -

  The most common misconception that I've encountered is about 'POINTS'.  You

can be charged POINTS by a broker or a bank.  If you're an 'A' borrower, it shouldn't be necessary though.   Even if you're not an 'A' borrower, it may not be necessary either - it may come down to how many choices are available for your scenario. 

  It's also possible for the originator to make some from the lender and borrower each - be sure to ask if this is the case in your transaction.  Banker institutions are not required to disclose the comp. that they receive from other parties, but brokers are required to disclose all sources.

With that said, the first thing to know is that POINTS can be hard to identify because

they go by so many different names.  I have seen POINTS quoted as one or more of the following: Origination Fee, Discount Fee, Broker Fee, Processing Fee, Admin. Fee, and Commitment Fee - even though some are not intended for this purpose.  Oddly, nobody seems to call them POINTS on official docs., therein lies the difficulty for the consumer.  It's unfortunate that this subject is not more straight-forward; but it's probably best to ask which fees can be eliminated if you were willing to pay a higher rate - that should help you identify the fee(s) you're looking for.

Finally, if you're an 'A' borrower(full doc. with good credit), points can be a losing proposition if you end up selling your property or doing a refi within 5 years of the origination date.  This means that most people are better off paying a higher rate instead of paying POINTS to get a lower rate - food for thought.

  If you've ever shopped for a mortgage, then you know what a 'GFE' is.   A 'GFE'

(Good Faith Estimate) serves 2 purposes - it tells the borrower and the underwriter  how much money the borrower needs to have in order to close.  It also contains the

estimated settlement charges for that program & rate - so borrowers will ask for a completed GFE when they're trying to make a choice of the best lender or product.  

Some GFE's will look like they've got the best deal - when in reality they don't.

If questioned about it, the rep. often claims that it's 'just an estimate'.  However, a GFE is not meant to have certain items left out or to be general and vague- especially when it comes to the broker or lenders' own charges.

  In addition to their own in-house fees (Application, Credit Report, Appraisal),

loan reps. estimate one-time charges on the GFE for several 3rd parties in the transaction /  mainly attorney-related fees*, like closing, title, and recording fees.  There are also bank fees** - and it's not unusual for these to be off by $10. or $20./ up or down - nothing major.

 *Attorney-related fees(title search, closing, title insurance,courier, recording) are listed, but are not commonly verified by the loan rep. when the GFE is filled out; so it's a good idea to discuss the amounts directly with your lawyer. 

**Bank fees: Underwriting, Doc. Prep., Wire, Tax Svc.,  Flood Cert. are ostensibly unavoidable as well - (meaning somebody has to pay them).

   If it stops there, you probably got a fair & reasonable quote.   But it might still occur that you'll see additional charges or 'Junk fees', which generate excess profits for the lender/broker - yet sound more like hard costs, or overhead.  

Likely examples of junk fees are: processing,  discount, settlement, broker, commitment, administration,  and investor fees.  These all sound customary and necessary, but most are just junk fees with fancy names.  They're not illegal, but these fees are often explain why a certain lender is offering a lower rate.  In effect you're buying down the rate 1/8 or more by paying a fancy-sounding fee.

Certainly, it's a good idea to be sure about what you've bargained for - so please review the following suggestions -

 Recommended Safeguards:

1. First, ask for a guaranteed amount on lender-related fees - because after all,

    even though it's a GFE, the lenders' own fees don't have to be estimated.

2. If the line-items on the GFE seem too vague, ask for an explanation of which

    fees go to the bank, the broker, the attorney, etc.

    (Please note: my company now collects a processing fee of $200. - but at the

    same time, we stopped charging an application fee).  It's still my contention that

    a processing fee is a 'junk fee' more often than not.  It certainly would be a good

    idea to get clarification if both 'application' and 'processing' fees are present.

3. Ask the loan rep. for a 'cap' (in writing), assuring a ceiling of lender-related costs.

    If you find out your attorneys' fees in advance, there's no reason why you can't

    get a cap for all one-time charges - not just lender-related.

4. Bring the GFE to the closing- so that you and your lawyer can monitor tolerances

    for line-items as listed on the final settlement statement vs. the GFE.

5. Once you have a satisfactory quote for rate, program, & fees, make sure that you

    get assurance (preferably in writing) that the lender has locked you in for a

    sufficient length of time.  Don't assume that you'e locked - only to find out

    otherwise - a common source of misleading internet advertising by the way.

6. Be aware of whether your loan has a prepayment penalty feature or not.

    Oddly, the State of Connecticut does not require that lenders give advanced notice

    of prepayment penalties - yet this often has a major impact on the rate and fees

    that are quoted up-front.  It's also a significant factor in determining the fee

     that the loan rep. receives from the bank - and is not a loan feature that you

    find out about at the closing.  Some prepayment provisions run for as long

    as 5 years, and the amount of the penalty could be well into the thousands. 

 Footnotes -

A. Prepayment penalties and rate-lock info. do not normally appear on the GFE,

    so be vigilant in discussing them.  If a lender has nothing to hide, then they will do

    what they can to satisfy your concerns in black and white. 

B. There is another form that can clarify things for you - the Truth in Lending

     disclosure.  This form requires a separate itemization to accompany it - but it 's

    meant to further verify those line-items that affect your rate and costs.  However,

    the GFE is still the best way that I know of to get a proper reading on the quote -

    especially if you're looking to apply for an ARM product.