When it comes to mortgages and borrowing money, borrowers are often not fully aware of all the facts and are forced to rely on the loan originator to suggest their best options. This immediately creates a problem, who to trust. Keep in mind that most loan originators are fully commissioned and as a result will charge you the amount they want to make. Typically a loan originator makes a percentage of what the company makes.

Often people make the mistake of gravitating to the best interest rate not realizing there are many other factors that determine a good loan transaction. Pretty much everyone can offer you the same rates depending on what other charges are quoted. Often a company will quote a base rate and not refer to the associated charges. I am here to tell you the whole story, to arm you with the information you need to negotiate a good loan transaction.

Obviously the interest rate is one of the primary factors but we should also take note of origination points, discount points and loan closing costs. Often times loan origination and discount points are used to reduce rates and loan closing fees are padded to replace the lost income of a lower quoted rate. Some of the closing fees are somewhat fixed by third party vendors but there are several that can be adjusted to make up income for low rates. Fees like processing, underwriting, closing and administration are often padded to add to the companies income. The bottom line is, don't always assume the company offering the lowest rate is the best deal.

The federal government created a form to provide people with the tool to compare this information. The problem is, the general public does not know what this form is for or how the read it. The federal Truth-In-Lending disclosure provides the information to make a comparison between lenders. This form provides an APR that discloses the true cost of the loan. The form takes the interest rate and fees and calculates an APR for consumers to use as a guide to which loan is the better deal. A loan with a lower interest rate may have a higher APR due to higher fees. When you understand that the fees can be financed over the life of the loan, you can understand that the cost can far out weight the lower rate benefit.

The federal government also has the Good Faith Estimate disclosure which gives you a breakdown of all the fees, line by line. Both of these forms are to be re-executed if the terms change by more than a small percentage. The forms should be mailed within 3 business days of application. The only problem to these guides is that they require application to be required and the application process may require a fee. Now we are back to square one, you must find someone to trust before application.

I suggest you get several quotes from several loan originators. Assume that the lowest quote is not the best deal for you unless that originator gives you something in writing that discloses all fees. Obviously the company and originator need to make money but not the greedy earnings they have had for the last several years. This greed was directly responsable for the situation we find ourselves in currently.

I am a 30 year mortgage professional and I am disgusted with mess my industry created. I have worked in all positions including; processing, closing, underwriting, compliance, audit, manangement and loan origination. I saw this mess coming 5 years ago but the government does not allow lenders to deny loans if they meet guidelines. Both lender greed and government lack of regulation contributed to this mess. Allowing the investors to set the guidelines with no oversight will always cause a problem.

The normal guides for conventional loan ratios is 28/36, this means that your housing debt should not be more than 28% of your gross income and your total debt should not exceed 36% of your gross income. With the addition of automated underwriting systems, many times loans with ratios far exceeding these guides are being approved stritly because they have good credit. All it takes is a few months of unemployment or a medical tragidy to send these loans into default.

Use these guides yourself and inquire what your ratios are. It is perfectly acceptable to pass these guides to some degree but if your ratios are 35/76 then you may want to reconsider. Why strap yourself into a tight situation that may explode down the road?

Take the time to ask questions and get details before applying for any loan. These loans generally last 15 or more years and the cost to refinance is high. Eliminating issues upfront can save you thousands down the line! A home is one of the largest items we will purchase in our lives. It is not only a huge investment but it is also a place where we make our homes and lives.