Way back in the old days, like the 1980s, home buyers didn't think twice about going to a local bank for home financing. They didn't shop rates, had never heard of a yield spread premium and didn't really understand loan points, but they were certain their neighborhood bank would give them a great loan. Nowadays, neighborhood banks are competing with credit unions, mortgage brokers and Internet companies for the same customer. So which should a buyer choose? First, realize that all lenders are required to give a borrower within three days a Good Faith Estimate, which home buyers then use to comparison shop. However, not all GFEs are equal and the numbers on that estimate are not required by law to be accurate. In fact, the annual percentage rate (APR) can be computed a number of ways from Sunday, so a borrower can't use an APR for comparison purposes, either.
Throw into the mix a confusing array of loan options -- enough choices to make anybody dizzy just thinking about it -- and it's amazing that buyers ever figure out where to get a mortgage.
© 2006 E. Weintraub; Licensed to About.com
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.
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