One good faith estimate isn’t good enough…

[photopress:Cats.JPG,thumb,alignright]In reading Elizabeth Rhodes response to an interest-only loan question, I realized that it has been a while since I talked about my uncomfort with interest only mortgages… I think way too many people are using them as a last resort to get into a house. When interest rates start rising, a lot of people could find out that they have bitten off more than they can chew.

The particular question Elizabeth was answering was in regards to whether or not someone should stick with a mortgage broker that made them feel uncomfortable… She gave an appropriate response (concluding that the client should walk away from this broker) but missed out on giving some truly useful advice that could really minimize this issue. What she could have said: “Get more than one quote!” or “You’re making a mistake by using only one broker anyway.”

In practical terms, “getting more than one quote” means getting at least two good faith estimates. At a minimum, you should get an estimate from at least one on-line banks and one local broker. If I ever create my own set of top 10 rules for a home buyer, getting two good faith estimates would be at the very top. No one has to tell you that you’re making a huge investment when you buy your home. By making loan brokers compete, it is entirely possible to get a much lower rate. Even saving just two-tenths of a percent on your loan can add up to thousands of dollars in the long run.

If you want some more detail, I wrote a bunch more on getting a home loan last March that stills seems relevant.

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