There's more to shopping for the best deal than just comparing interest rates. Each lender provides a "Good Faith Estimate" disclosing costs associated with the transaction. Ask for this disclosure before choosing your lender. You need it to make a fair comparison.
The costs disclosed on the "Good Faith Estimate" are basically divided into 3 categories:
Actual lender fees - controlled by the lender - Use this section to carefully compare lender charges.
Fees for required services - Estimated fees for services being performed by third parties. The lender does not control these fees; so consider the quote merely an estimate. (The Closing Specialists® fees fall into this category. Call or e-mail us directly for fee quote plus use our PA Title Rate calculator.)
Interim interest, escrows for taxes and insurance, and proration of taxes. Commonly referred to as "prepaid items," this section of the "Good Faith Estimate" should not be relied upon when comparing costs.
Here's how these figures are determined:
Interim interest - The maximum interest you could be charged at closing is 31 days. The loan officer can make the estimate look high or low by adjusting the number of days quoted. The true amount you will pay at closing is determined by the actual date of closing. If you prepare for 31 days, you're working with a good conservative number.
Escrows for taxes and insurance - If your lender is going to escrow for taxes and/or insurance, the loan officer will give you a rough idea of what to expect. The estimate can be made to look high or low based on the number of months the loan officer uses. Do not rely on these figures when comparing costs. Basically all lenders who escrow will use roughly the same figures at closing. All lenders adjust the final numbers based upon actual tax bills and the date of closing. We suggest you always use at least 10 or 12 months of escrows to keep your expectations conservative.
Proration of taxes - At closing, there will be an adjustment between seller and buyer for taxes already paid or due later in the year. Lenders typically do not include prorations in the "Good Faith Estimate".