July 29th, 2015 6:57 AM by Jackie A. Graves, President
people make expensive, easily avoidable mistakes when shopping for a mortgage.
who don't do their homework often end up paying more than they should, and in
some cases that extra cost can really hurt," says Paul Sian, a real estate
lawyer and Realtor with HER Realtors in Cincinnati. A study from the Consumer
Financial Protection Bureau, or CFPB, concludes that many consumers don't shop
for mortgages, and they tend to get their mortgage information from lenders and
real estate agents, who aren't impartial.
to Sian, borrowers tend to fixate on the home's purchase price, followed by the
interest rate. But factors like closing costs, the loan's total price tag,
whether the loan is fixed or variable, and whether the borrower is required to
get private mortgage insurance can dramatically alter what borrowers end up paying.
are four common mortgage errors and tips for avoiding them.
it's a new car or the latest gadget, consumers know it pays to shop around for
the best deal. But half of mortgage borrowers consider just one lender or
broker in their shopping process, according to the CFPB study.
is a good idea to shop around for mortgages in order to get better rates,"
Sian says. "Sometimes large banks and lenders don't offer the best rates
that can be had. Additionally, some lenders add in fees. While the final fees
do show up at the end, many borrowers don't understand the fees and accept them
as the cost of getting the loan, even though they could've avoided those fees
by shopping around."
small difference in the interest rate can make a big impact on cost. On a
$200,000 fixed-rate, 30-year mortgage, an interest rate of 4.5 percent costs
$59 a month more than a 4 percent rate. That adds up to $3,512 in the first
lower interest rate means the borrower would pay off an additional $1,421 in
principal in the first five years, even while making lower payments.
questions about mortgages come up, borrowers typically turn to their lender,
broker or real estate agent. While those are good sources, the CFPB found that
many borrowers could benefit from seeking out additional, objective sources of
information, such as housing counselors and news sites.
should seek a range of information, but each source should be vetted
thoroughly," says Greg Cook, a senior loan officer with Platinum Home
Mortgage in Temecula, California. "Borrowers should remember that the
right answers to their questions are often determined by the specifics of their
Cook understands that many borrowers, especially first-timers, ask friends and
family for advice, he says those sources are often unreliable because what
works for one person may not make sense for their friend. News outlets, on the
other hand, can be good places to get a "30,000-foot view" on the
topic, but, Cook says, they won't shed much light on an individual borrower's
for housing counselors, Cook says they can be a valuable resource, but often
their expertise is limited to lending programs, meaning they can help borrowers
discover which types of loans are available, but they won't necessarily have
insight into which lender is the right choice.