Zillow.com recently introduced True Cost, a new comparison feature within Zillow Mortgage Marketplace that allows borrowers to search anonymously across multiple loan programs, compare custom quotes and find the most affordable home loan for them. The True Cost feature calculates up front how much a borrower will pay in interest and fees over the time period they plan to live in the home. Borrowers can then compare the True Cost across all custom loan quotes they receive from lenders to determine the best loan for them.

Zillow Mortgage Marketplace is the only mortgage shopping service that enables consumers to submit loan requests anonymously and receive unlimited custom quotes from a network of thousands of confirmed lenders. On average, consumers receive 15 custom, accurate quotes to compare.

Since lenders are required to disclose all upfront fees, borrowers are able to compare loan quotes on a true apples-to-apples basis. The Quotes Received shopping tool enables borrowers to sort and filter out quotes with payments and fees they can’t afford. Lender reviews and ratings help borrowers decide what lender to contact.

“Truly shopping for a loan and comparing terms and costs on an apples-to-apples basis is excruciatingly difficult for the average consumer to do. This is why so many consumers find themselves in loans they don’t understand,” said Lloyd Frink, Zillow president. “We launched Zillow Mortgage Marketplace to change this, and to put the consumer first, by requiring lenders to break out all fees in a standard form, so consumers can compare custom loan quotes side-by-side. With True Cost, we’ve taken this comparison shopping a step further, and calculate for consumers not just what they’re paying up front or every month, but the true cost over the timeframe they plan to live in a house. This level of transparency has never before been available in mortgage shopping, online or off.”

Borrowers can view the True Cost over different time periods by adjusting the time-in-home dropdown menu. For example, a borrower can see how much they will pay in total interest and fees for various loan quotes over a five, 10 or 20-year period. In addition to the True Cost calculation, Zillow also displays the principal as an additional number to consider, because principal will grow at varying rates depending on loan program. This unprecedented transparency in mortgage shopping is important, since the ideal loan program and fee/rate structure can change depending on how long a borrower plans to own a home.

Zillow Mortgage Marketplace radically transforms the process of obtaining a mortgage and finding the best rates by adding transparency and competition that hasn’t before existed in the mortgage industry. Borrowers can shop for loans anonymously and get an unlimited number of accurate, customized rates directly from thousands of competing lenders within this open and free marketplace.

Mary Miller, Zillow Director Product Management, Mortgages, continues:

Zillow Mortgage Marketplace has launched a new feature, called True Cost, that allows borrowers to make an apples-to-apples comparison of custom quotes by calculating one number that incorporates interest rate, fees, points and time.

True Cost is the sum total borrowers will pay in interest and fees during the expected time they plan to keep the loan.  We call it True Cost, because it is the amount of money borrowers will never recoup. It does not include the principal accumulated, since principal is not an outright cost, but rather, it is equity that borrowers will likely get back when they sell their homes.  However, we display the amount of accumulated principal as an additional number to consider, because principal will grow at varying rates depending on loan program.

When comparing mortgage quotes, most borrowers focus on two factors: interest rate and upfront fees. But it’s difficult to determine whether it makes more sense to choose a loan with a lower rate and higher fees, or a loan with higher fees and a lower rate.  The best combination depends on how long borrowers will have the loan.

For example, a lower rate with higher upfront fees may make the most sense if borrowers keep the loan for 20 years, but low fees with a higher rate may be a better way to go if they are only staying in the home for 4 years.

True Cost calculates these trade offs between rate and fees and does the math for borrowers.  It helps them find the least expensive loan for their expected time frame based on rate and fees.

After submitting an anonymous loan request on Zillow Mortgage Marketplace, borrowers view custom quotes received from lenders on the Quotes Received page.  They can use the True Cost feature by selecting how long they plan to stay in their home, and then Zillow calculates how much they will pay in interest and fees over that time period.  Borrowers can click the top of the True Cost column to sort the least expensive loans for the given time period to the top of the list.  They can also adjust the time drop-down to see how costs will change if they end up keeping the loan longer or shorter than they expect.

Borrowers should use True Cost as a starting point to find the least expensive loans, then use the monthly payment and fees filter to remove quotes they cannot afford.  Once they narrow down to a few quotes, they can check out the lender profiles, reviews, and ratings, and then select a couple of lenders to contact.

Source: Zillow.com