Loan origination fees are reflected on your good faith estimate as part of your closing costs. It's assumed then that the rate that they are offering is at or close to 'par', which is the wholesale rate that the bank is offering them. Rebates are not always listed on a good faith estimate, especially if you're dealing with a 'bank' vs a loan broker. It would be listed at the very bottom of your report.
In addition, you want to check all of the other fees, such as the processing and underwriting fees. Some of these are charged from the lending bank, some from the broker's office, and then of course, there's the title fees. All of these are variable and not necessarily under the control of the loan broker, but if they went with different loan programs, the fees are different.
In other words, there are so many variables to your costs besides the commissions to your mortgage broker to consider. That's why many people say, that if the rates are good, don't worry about the rest. ...
I'd suggest you do the following:
1. Let your mortgage broker know that you are looking for a second opinion on the loan. Nothing makes someone sharpen their pencil like competition.
2. Ask a qualified loan person to at least explain to you your good faith estimate from the first lender. This is not easy to understand from a layman's perspective (even though I was an active investor for years, it wasn't until I started doing loans that I truly understood all of it) That should help you feel better about what you're evaluating.
3. Make sure you understand YOUR needs- are you willing to pay a little higher interest rate in order to minimize upfront costs of the loan? or would you prefer to pay upfront fees to get a lower loan rate? It really depends on your plan of how long that you plan to live in the house and your financial plans in general.
4. Check your APR and that's what you should compare between loan offerings. The APR is comprised ot the loan rate and specific costs associated with closing such as commissions, processing fees etc. That's the best gauge of comparing loan offerings. It does not contain your prepaid items (pre-paid interest, insurance, pre-paid taxes), or some of the other costs. I have a report somewhere that says what is included in the rate and what isn't...I'd have to find it...
Hope that helps, and great question! More people need to be asking this when they're buying a home.
Realtor, GRI, ABR, SRES
The Galster Group
I have checked with several banks and brokers to determine this. if you pay "points" you are not paying a "commission" you are "buying down" the rate. The reduction in payments should be enough to justify the cost of the point or points.