Lowest Total Cost

[jtwallace]

What is the name of your state? Florida. Hello,

Bank of America is offering me a 5/1 ARM new construction loan for 6.125%, 7.303% APR, and payments of 1482.57. Suntrust offers the same loan for 6.25%, 6.5219% APR, and payments of 1559.68. There are no points on either loan. Both claim that the total cost of their loan is the lowest of the two. Isn't the lowest APR the determining factor in lowest total cost? Yet look at the difference in the payments. Neither bank will give me a straight answer and each obfuscates the issue with references to yet to be determined settlement charges.

[efflandt]

How APR relates to RATE depends upon how often the APR is compounded. If interest is compounded daily, the rate may be slightly higher than the same APR compounded monthly. It is hard to tell in this case if the lower APR with lower payment is the better deal without knowing total closing costs or whether any points are involved.

When I was looking to refinance last year, BoA's closing cost estimate on their website appeared to be very high. But I have nothing to actually compare that to since I ended up refinancing my existing balance at a reduced fixed interest for shorter term through my existing lender for $170 total closing costs (already had original appraisal and other papers).

[jtwallace]

Thanks for your reply. There are no points on either loan, but the confusing part is that the lower APR has the higher payment (by over $70).

[efflandt]

I guess I got turned around as to which was rate and APR. The effective rate is a method of equalizing different compounding periods and is used by mortgage calculators to figure payments. Your quote for lower rate and lower payment is consistant with that.

But from looking at loan rates now, there seem to be a wide variety of APR's for any given rate, so there seems to be more mystery to that than whether it is compounded monthly or daily.

[jwolf]

Originally Posted by jtwallace

Thanks for your reply. There are no points on either loan, but the confusing part is that the lower APR has the higher payment (by over $70).

The Payments are based on the note rate not the APR. The note rate you list from BofA is lower, therefore the payment is lower. The APR is supposed to factor in closing costs to allow you to compare between different lenders, who may have different costs or who may label costs differently, etc..

I would imagine that anything outside of the lender fees (such as title/settlement costs) are nothing more than estimates (even more so than the lender fees) from both lenders. Do the good faith estimates (assuming you have them?) break down the fees between lender fees, title/settlement fees, and prepaids/reserves? Who has lower lender fees?

Also, it might make things easier for you if you compared the same note rate from both lenders.

[jtwallace]

Hello,

Both banks have different fees. For example, one bank charges an appraisal fee, the other doesn't. One bank charges an application fee, the other doesn't. All done, I suspect, so that no comparison can be made. That is why I was hoping to reduce the whole mess to a comparison of APRs which I hoped would take all that into consideration.

[jwolf]

Do you have good faith estimates on paper from both lenders?

[jtwallace]

Thanks for your reply. I have the "Purchase Loan Analysis," but each lender calls fees different things and one lender groups fees while another breaks some down. That's why I hoped the APR would tell the final story. All quotes are estimates, and there are no penalties for low balling. Getting the good faith estimates requires application fees or Appraisal fees (depending on the lender) of $325.

[jwolf]

Originally Posted by jtwallace

Thanks for your reply. I have the "Purchase Loan Analysis," but each lender calls fees different things and one lender groups fees while another breaks some down. That's why I hoped the APR would tell the final story. All quotes are estimates, and there are no penalties for low balling. Getting the good faith estimates requires application fees or Appraisal fees (depending on the lender) of $325.

You can PM me if you like and I'll give you my email. I can take a look at the analyses you have and give you my opinion on which deal is better. It sounds initially like Suntrust has the better deal. Obviously my opinion is only that, so take it for what you willl.

[pojo2]

Beware of emailing private information to ANYOne on this site or any other website where you do not know the people from a person on Mars. Especially someone with 7 total posts.

Just my opinion mind you. Info that is posted here is to educate all and so if you would like to post some facts then do so and we all learn from the posts made here.