Posts Tagged ‘RESPA’
The ‘In-House Lender’ – Okay? Or RESPA Violation?
June 6th, 2011Interest Rate vs. APR
September 24th, 2009Today, The Kunselman Team is going to explain a sometimes confusing part of the mortgage process. The differences between the interest rate and the Annual Percentage Rate (APR) can raise some questions that can be difficult to explain.
Most everyone understands what their interest rate is. It is the rate of interest that they will be charged for the money they borrow. It is also used to calculate your monthly payment. Annual Percentage Rate or APR even though is sounds similar can be quite different.
APR is a calculation of the annual cost on a loan over the full term of the loan and it is found on the Truth in Lending Disclosure (TIL). The APR not only factors in the monthly interest cost, but the upfront costs of the loan too. The idea behind the APR is that if you are trying to compare two or more loans, this APR should give you a better idea of which is the better program from a strict numbers perspective. Let’s look at two example loans. One has an interest rate of 6.00% and an APR of 6.50%. The other loan has an interest rate of 5.75% and an APR of 6.75%. Strictly on a cost perspective, loan number one is the better choice because it’s APR is 6.50% compared to the seconds loans APR of 6.75%. The reason behind this difference is in the fees that the brokers are charging on the two loans.
Something to keep in mind also is that the new Mortgage Disclosure Improvement Act requires that if the initial APR that a lender disclosed to you changes by more that .125% by the end of the transaction, you the borrower must be notified and given three business days to review the new figures. It is not uncommon that there could be a slight change in the APR because legitimate fees do come up during the loan process. If there is a large change, it would be wise to sit down with your mortgage broker and get clarification on why there was such a large change.
We hope that you found this information useful and as always, if you would like to see what it feels like to work with a mortgage team that can bring a little sanity to an insane world, give The Kunselman Team a call.
On Your Marks, Get Set…Wait!
September 24th, 2009Anybody that has tried to get anything done with their mortgage recently understands that things have been moving a little slow. Well good news, the politicians in all their infinite wisdom decided that you the consumer need EVEN MORE TIME to make a proper decision about your mortgage. The fact that on average a mortgage takes 3-4 weeks to complete and that after you sign documents on a refinance; you still have an additional 3 days to decide whether or not you want the new loan.
The Home Economic Recovery Act (See the name even sounds good) or HERA as it is also known, went into effect on July 30, 2009. On average we are expecting that HERA will add 5 to 10 days for your new mortgage to close. What that really means is that now instead of being able to lock rates for 30 days, many loans will have to be locked now for 45 days. The longer the lock, the more it costs.
Now I understand what the intention behind this new law was to try and protect consumers but they are going about it the wrong way. There are enough laws on the book. What would be more helpful to consumers would be to enforce the existing laws. All the laws in the world mean nothing if they are not enforced.
Something that would make more sense is giving the consumer a way to file a complaint if they feel they were tricked or lied to. If the Department of Real Estate received enough complaints, then they could investigate a particular broker’s business, instead of changing the rules to punish everyone. Because as I have stated before, those people who obey the existing laws will obey the new laws and those who don’t obey the existing laws, will not obey the new ones either. They will just figure out a way around them.
