Why a California mortgage quote is sometimes higher - and why it doesn't have to be

When evaluating California mortgage quotes, understanding the true cost of the loan involves more than just looking at the interest rate. Here are key factors to consider to ensure you're getting a comprehensive and accurate picture of your mortgage costs:

1. Counting the Points

• Discount Points: These are fees paid upfront to lower the interest rate on your mortgage. Each point typically costs 1% of the loan amount and can reduce your interest rate by approximately 0.25%.

• Origination Points: These fees are charged by lenders for processing the loan and are usually a percentage of the loan amount. It's essential to check whether these points are included in your quote or added later.

• Understanding Quotes: Some lenders may quote only discount points or only a portion of the total points. Be sure to ask for a detailed breakdown of all points involved to avoid surprises later.

2. Market Conditions and Rates

• Supply and Demand: California mortgage rates fluctuate based on market conditions. When there are more sellers than buyers, rates tend to be lower, which is beneficial for buyers. Conversely, during a buyer’s market, rates may be higher.

• Credit History Impact: Your credit score plays a significant role in determining the interest rate you'll be offered. Before applying for a mortgage, review your credit report and address any issues to secure a more favorable rate.

3. Common Lending Scams

• Rate Misrepresentation: Be cautious of lenders who advertise exceptionally low rates. Often, these rates are not available at the time of closing. Lenders might offer these rates on a short lock period, which can change before your loan is approved.

• High Fees for Low Points: Some lenders might charge high fees to offer lower points. Unlike points, these fees often cannot be deducted from your loan, which can make the effective rate higher than initially quoted.

4. Tips for Evaluating Quotes

• Request a Detailed Quote: Ensure that all fees, including discount and origination points, are clearly outlined in your quote. Ask for a detailed loan estimate and compare it with other offers.

• Understand APR: The Annual Percentage Rate (APR) includes both the interest rate and any additional costs such as points and fees. Comparing APRs across different lenders gives a more accurate picture of the overall cost of the loan.

• Lock-in Rate Carefully: If you’re offered a low rate, verify the duration of the rate lock and understand the risks if the rate is locked for a short period. Ensure that you have enough time to complete the approval process.

By thoroughly examining all aspects of your mortgage quote and understanding the factors affecting rates and fees, you can make a more informed decision and avoid potential pitfalls in the mortgage application process.