This is Part 2 in a series of guest posts about Good Faith Estimates by Kyle Pugel. Kyle is a mortgage advisor at Coldwell Banker Home Loans, who promises to do whatever it takes to ensure that one of the biggest and most important purchases you’ll ever make will also be one of your easiest. His specialties include reviewing your home loan needs with you as well as suggesting the best financing options to meet those needs.
In my last article, The Importance of a Good Faith Estimate – Part 1, I explained what a Good Faith Estimate is and how it is broken down into three categories: charges that cannot increase, charges that can increase by up to 10%, and charges that can change. If you missed it, you may want to click on the article title above and give it a read!
Today, I am going to describe which charges fall into the first category, charges that cannot change.
As the title states, these charges cannot change after they have been disclosed on a Good Faith Estimate. These charges include the lender’s origination charge, credits or charges for the specific interest rate chosen, and the adjusted origination charge.
The lender’s origination charge is the amount the lender is charging to offer its loan. This is usually a flat fee or a percentage (points) of the amount being financed. Depending on the amount being financed and the fee structure in place, it is possible for this number to vary considerably from one lender to another.
The next amount that cannot change once it has been disclosed on the Good Faith Estimate is the credit or charge (points) for a specific interest rate. Market interest rates are available to borrowers at zero points. This means borrowers don’t have to pay any additional points/fees or get to receive any lender credits in exchange for a market interest rate. However, if a client would like a lower rate, lenders may charge additional points on the Good Faith Estimate to buy the rate down below current market levels. On the flip side, if a client would like some help with his/her closing costs, lenders can also offer “lender credits” in exchange for an interest rate slightly above the market. All three options can be advantageous in different situations, based on the assets and income a borrower has.
The last charge, a lender’s adjusted origination charge, is the sum of the lender’s origination fees plus any points collected minus any credits given a borrower. In effect, this is the total amount the lender will receive for their origination services and the rate/point combo selected.
This is the end of Part 2, but in my next article, we’ll discuss the charges that can fluctuate by up to 10% on a Good Faith Estimate. If you’d like to read on, click over to “The Importance of a Good Faith Estimate – Part 3.”
Image Credit: Bill David Brooks on Flickr. CC Licensed.
The Hill Group
7975 N Hayden Rd C-100
Scottsdale, AZ 85258