{"id":4314,"date":"2024-11-15T16:12:08","date_gmt":"2024-11-15T21:12:08","guid":{"rendered":"https:\/\/tomo.com\/blog\/?p=4314"},"modified":"2025-04-27T11:17:59","modified_gmt":"2025-04-27T16:17:59","slug":"how-to-get-a-fair-deal-on-a-mortgage-what-lenders-try-to-hide-in-a-loan-estimate","status":"publish","type":"post","link":"https:\/\/tomo.com\/blog\/how-to-get-a-fair-deal-on-a-mortgage-what-lenders-try-to-hide-in-a-loan-estimate\/","title":{"rendered":"How to get a fair deal on a mortgage\u2014what lenders try to hide in a Loan Estimate"},"content":{"rendered":"\n

Right now, about 9 in 10 home buyers in America pay too much for their mortgage. <\/a>Without knowing it, people pay steep fees and higher rates than other people in the exact same financial circumstances. <\/p>\n\n\n\n

<\/p>\n\n\n\n

Imagine two identical people want to buy the exact same house. They have the same credit score<\/a> and income, debts<\/a>, and everything else. Due to deceptive sales practices that are incredibly common (and used by the biggest lenders in America), one of these people might pay as much as $20,000 more than the other for the exact same loan. It\u2019s bananas. <\/p>\n\n\n\n

To help people get a fair deal, we wanted to expose some of the tricks and practices big lenders use to disguise or misrepresent the numbers that are in a Loan Estimate<\/a>. <\/p>\n\n\n\n

<\/p>\n\n\n\n

\n
See today’s rates<\/a><\/div>\n<\/div>\n\n\n\n

<\/p>\n\n\n\n

Let\u2019s break down what\u2019s in a Loan Estimate<\/h3>\n\n\n\n

<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

<\/p>\n\n\n\n

When you look at a loan estimate, it can be a lot to take in, especially if it\u2019s your first time. There are so many categories, and without experience or some real study, it\u2019s hard for most buyers to feel confident distinguishing a good deal from a rip-off. Lenders know this and may take advantage by shifting costs and downplaying certain fees. Here\u2019s what you should pay attention to\u2026<\/strong><\/p>\n\n\n\n

<\/p>\n\n\n\n

Interest Rate<\/h3>\n\n\n\n

<\/p>\n\n\n\n

This matters, of course, but any lender anywhere can charge you more or less for a specific interest rate. <\/strong>It\u2019s referred to as \u201cbuying points<\/a>,\u201d where there\u2019s an upfront cost to get a specific rate. If you have  $0 associated, that\u2019s called a \u201cpar rate<\/a>.\u201d Sometimes it\u2019s a good idea to buy points\u2014if you don\u2019t plan to move or refinance<\/a> in the next 5 years, such as when interest rates are especially low. But points aren\u2019t always a good idea, financially. Our research shows that while a majority of buyers get points, very few know what they are or even whether they\u2019re a good investment. So while it\u2019s tempting to look at the interest rate at face value, remember that it\u2019s not the whole story. For that, you need to take a trip to Section A.<\/strong><\/p>\n\n\n\n

<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

<\/p>\n\n\n\n

Section A<\/h3>\n\n\n\n

<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

<\/p>\n\n\n\n

Loan points<\/strong>: This section is key for comparing lenders. It details what you\u2019re paying to get the interest rate shown. You may have chosen to buy points to lower your rate, which would show as a fee here. Alternatively, you could have opted for lender credits<\/a> (increasing your rate) to offset upfront closing costs, appearing as a credit here.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Origination fees<\/strong>: What you likely didn\u2019t choose are the origination fees (sometimes called underwriting or processing fees) listed below the points charge. Most lenders charge thousands in these fees as a \u201cthank you\u201d for choosing them.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Here are three  examples of that fee<\/strong> worded differently.<\/p>\n\n\n\n

<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n
\"\"<\/figure>\n\n\n\n

<\/p>\n\n\n\n

<\/p>\n\n\n\n

We don\u2019t mean to brag (too much), but here at Tomo Mortgage, we think this fee is unfair and, frankly, highway robbery. That\u2019s why the origination or underwriting fee will always be $0 on your loan estimate from us\u2013as it should be.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Cost at closing<\/h3>\n\n\n\n

Many lenders emphasize just the interest rate or out-of-pocket closing costs\u2014it seems logical, right? But those aren\u2019t the only important numbers to watch. How your lender calculates \u201ccash to close\u201d matters a lot, and unfortunately, this number can often be manipulated to appear lower than what you\u2019ll actually pay at closing.<\/p>\n\n\n\n

<\/p>\n\n\n\n

One common trick is underestimating costs in sections E, F, and G of the Loan Estimate\u2014where taxes, insurance, and escrow are listed. These numbers are technically estimates, but some lenders deliberately lowball them. Then, when it\u2019s time to close, borrowers are surprised by thousands of dollars in unexpected charges.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Here\u2019s how it happens:<\/strong><\/p>\n\n\n\n

<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

<\/p>\n\n\n\n

Escrow and prepaid costs:<\/strong> Some lenders list fewer months of taxes and insurance reserves than you\u2019ll really need. For example, they might show just three or four months of property tax escrow when six months is typical. That makes the upfront \u201ccash to close\u201d number seem lower\u2014until the final closing disclosure reveals the true amount.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Title costs and third-party fees (Section C): <\/strong>Lenders may also underestimate title insurance and settlement fees. Later, they blame the difference on the title company or your real estate agent\u2019s choices, even though the initial underestimation made their offer look artificially cheaper.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Earnest money deposit:<\/strong> If your purchase agreement isn\u2019t finalized when the Loan Estimate is issued, some lenders leave out your earnest money deposit. This omission inflates the \u201ccash to close\u201d figure and can cause confusion later when the real math catches up.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Always look carefully at Sections C, E, F, and G in your first Loan Estimate\u2014not just the interest rate\u2014to get a real sense of what you\u2019ll owe at closing.<\/p>\n\n\n\n

<\/p>\n\n\n\n

When things don\u2019t add up<\/h3>\n\n\n\n

<\/p>\n\n\n\n

At closing, it\u2019s all too common to hear lenders say, \u201cthat was just an estimate\u201d if costs turn out higher than expected. In reality, these estimates were often intentionally understated to keep clients progressing down the mortgage process until it\u2019s too late to switch\u2014by then, clients may have too many sunk costs, like a home inspection,<\/a> appraisal<\/a>, title<\/a>, and earnest money deposit.<\/a><\/p>\n\n\n\n

<\/p>\n\n\n\n

And if you haven\u2019t done it before, this is where they get you<\/h3>\n\n\n\n

<\/p>\n\n\n\n

The truth is, most people only go through the mortgage process once or twice in their lifetime (I mean, how many of us are getting so many mortgages that we become experts?). It\u2019s complex, and lenders know that the unfamiliarity and inaccessibility of these details give them an advantage. Many often rely on this knowledge gap to manipulate costs, turning what should be a straightforward process into a maze of fees <\/a>and hidden charges. <\/p>\n\n\n\n

<\/p>\n\n\n\n

That\u2019s why it\u2019s crucial to know how to read each section of the loan estimate and understand how costs might change\u2014so you\u2019re not caught off guard or locked into an expensive loan.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Transparency should be the standard, not the exception<\/h3>\n\n\n\n

<\/p>\n\n\n\n

Unfortunately, not every lender is forthcoming about what you\u2019ll really pay and whether their loan is really a good deal. Honesty and transparency can be really hard to find. <\/p>\n\n\n\n

<\/p>\n\n\n\n

We\u2019re working to change all that, one loan estimate at a time. <\/p>\n\n\n\n

<\/p>\n\n\n\n

\n
How much home can I afford?<\/a><\/div>\n<\/div>\n\n\n

Sam Lanfear<\/a><\/p>

Sam Lanfear is the SVP of Revenue at Tomo. He’s led teams reaching 200 in size at major companies, including Americas largest mortgage provider, Rocket Mortgage where he served as VP of Sales and many other roles leading up to it, in his 9 year tenure.<\/p><\/div><\/div>\n\n\n

If you’re ready to start your journey to homeownership, get pre approved with Tomo Mortgage today.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Right now, about 9 in 10 home buyers in America pay too much for their mortgage. Without knowing it, people pay steep fees and higher rates than other people in the exact same financial circumstances.  Imagine two identical people want to buy the exact same house. They have the same credit score and income, debts, […]<\/p>\n","protected":false},"author":34,"featured_media":3845,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[13,285],"tags":[],"class_list":["post-4314","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-home-buying-guide","category-home-buying-tips"],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/tomo.com\/blog\/wp-content\/uploads\/2024\/09\/lending-tree-vs-rocket-tomo-mortgage-jpg.webp","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/posts\/4314","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/users\/34"}],"replies":[{"embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/comments?post=4314"}],"version-history":[{"count":10,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/posts\/4314\/revisions"}],"predecessor-version":[{"id":5490,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/posts\/4314\/revisions\/5490"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/media\/3845"}],"wp:attachment":[{"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/media?parent=4314"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/categories?post=4314"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/tags?post=4314"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}