After you have found the home of your choice, you may think that your shopping days are over. Actually, only the first phase has been completed. Next comes finding a mortgage and payment terms that fit your budget. Your choice of lender and type of loan will influence not only your settlement costs, but also the monthly cost of your mortgage loan. There are many types of lenders and types of loans you can choose. You may be familiar with banks, savings associations, mortgage companies and credit unions, many of which provide a home mortgage loan. Some companies known as "mortgage brokers" offer to find you a mortgage lender willing to make you a loan. A mortgage broker may operate as an independent business and may not be operating as your "agent" or representative. A mortgage broker may be paid by the lender, you as the borrower, or both.

    There is a state law that requires mortgage loan brokers to register with the Department; maintain a Surety Bond or Letter of Credit in the amount of $10,000; and maintain an office in the state that is open 30 hours a week and staffed by an employee who can answer questions about the broker's files. There are approximately 320 registered brokers in South Carolina.

    If a borrower submits a loan application, the broker must provide the borrower with a fee agreement to sign at application which explains what the broker will earn as a fee for finding the borrower a mortgage loan. In most instances, the broker must provide the borrower with an Attorney Insurance Preference Form, A Good Faith Estimate and Estimated Truth and Lending Statement within three days of the date of application unless the borrower is turned down for the mortgage. The broker may also accept an advance fee to cover the actual cost of a credit report and appraisal. This fee is refundable if these costs were not incurred.

    Remember loans can have a fixed interest rate or a variable interest rate. Fixed rate loans have the same principal and interest payments during the loan term. Variable rate loans can have any one of a number of "indexes" and "margins" which determine how and when the rate and payment amount change. If you apply for a variable rate loan, also known as an adjustable rate mortgage ("ARM"), a disclosure and booklet required by the Truth in Lending Act will further describe the ARM. Most loans can be repaid over a term of 30 years or less.

    Comparing APRs may be an effective way to shop for a loan. However, you must compare similar loan products for the same loan amount. For example, compare two 30-year fixed rate loans for $100,000. Loan A with an APR of 8.35% is less costly than Loan B with an APR of 8.65% over the loan term. However, before you decide on a loan, you should consider the up-front cash you will be required to pay for each of the two loans as well.

    Another effective shopping technique is to compare identical loans with different up-front points and other fees. For example, if you are offered two 30-year fixed rate loans for $100,000 and at 8%, the monthly payments are the same, but the up-front costs are different:

Loan A - 2 points ($2,000) and lender required costs of $1,800 = $3,800 in costs.

Loan B - 2 1/4 points ($2,250) and lender required costs of $1,200 = $3,450 in costs.

    A comparison of the up-front costs shows Loan B requires $350 less in up-front cash than Loan A. However, your individual situation (how long you plan to stay in your house) and your tax situation (points can usually be deducted for the tax year that you purchase a house) may affect your choice of loans.

    If you have questions, need information, or want to file a complaint, contact the Department.