The previously booming home- loan industry is undergoing a contraction. In fact, the Mortgage Bankers Association predicts the industry will shrink by 14 percent in 2006. What's the good news? That means lenders are competing harder to win your business and you can take advantage.

Beyond discounts and extended terms, banks are leveraging their scale to eliminate many of the costs that cause confusion and frustration for homebuyers at closing. Bank of America's Floyd Robinson says his company offers real savings off closing costs of up to $2,000.

Robinson says they can offer this because they cut internal costs from the process and are passing those savings on to customers. These funds can be critical when applied towards the down payment, moving fees or new home amenities.

Robinson suggests you follow these tips when shopping for a mortgage in this new lending environment:

• Check with your bank first-banks may reward your loyalty by offering a relationship discount.

• Don't pay for fees that you know other lenders have eliminated-take advantage of programs like the one offered by Bank of America, which eliminates the origination, application, lender closing, appraisal, flood determination, tax service, credit report and courier fees for existing customers.

• Confirm the savings are real-make sure the lender has truly cut costs and isn't simply rolling them into the overall cost of the loan.

• Focus on the annual percentage rate (APR) and not just the interest rate-the APR is what the loan is actually going to cost you and it's a more accurate comparison of loan offers.

Most of all, remember to always work with a lender that you know and trust; one that will work with you to find the right loan for your individual needs and your monthly budget-now and in the future. The right lender will take the gimmicks, guesswork and surprises out of closing and help make your dream home a reality.

Posted by Stephen Spisso on December 13, 2008 at 12:00 AM

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