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The 5 Biggest and Costliest Mistakes Made When Obtaining Your Mortgage……

I know this sounds like exactly what you should do, but it’s not. I imagine you are thinking, “Is this guy nuts!” “Why wouldn’t I want to get the lowest possible rate?” Of course you want the lowest possible rate available, but at what cost do you want it?

Have you ever wondered how there can be so many different rates advertised by so many different mortgage companies? Isn’t it strange that so many lenders say they offer the lowest rate possible or available? On any given day you can read a newspaper ad or call on the phone and get a “rate quote.” Even the Internet is loaded with these so-called “lowest rate possible” offers. (More on the internet later.)  Often these quotes will vary widely. Why do they and more importantly, how can they?

Let me explain. In the mortgage industry, mortgage companies do not determine interest rates. They are determined by Mortgage Backed Securities (MBS’s). Fannie Mae and/or Freddie Mac, the world’s largest suppliers of mortgage money, offer these securities. Other big investors in the world of money and capital also offer mortgage securities. All of these securities demand certain yields (interest). Mortgage companies are only the source for bringing mortgage loans to the public.

The interest rate you pay on a mortgage depends on many important factors, how much you’re borrowing, your credit scores, loan to value, full documentation or no documentation etc. Not just because XYZ Mortgage Company says they can give you the lowest rate. These factors are not disclosed to you in their advertising. They don’t have to be, they are designed to make the phone ring. 

One of the industries most common tactics is “bait & switch”. It goes something like this: you respond to the rate quote, through the mail or over the Internet and during the process you are told…… “Oh, that rate is no longer available”…. “You don’t qualify for that rate”… “Your mortgage amount isn’t large enough to get that rate”… “That rate costs 2 points”…. etc. At this point you may realize that you responded to the advertising for the rate only, but since you’re already there making application you might as well stay. If this happens, (and it does frequently) you have fallen into MORTGAGE BAIT and SWITCH……….

Financing of a home, the biggest investment of your life should not be left up to someone 5 states away.  WHY?  Mortgage Bait and Switch.  At the end of this report are printouts from the web site www.brokeruniverse.com (this site is where mortgage professionals go to chat).  READ THESE CHAT LOGS!  These “professionals” speak of how easy it is to rip you off because they are dealing with you over the phone or internet, not FACE to FACE and local.

You also need to checkout www.ripoffreport.com. Consumers go to this site to warn other’s about company’s who have ripped them off.  Guess what industry has the most consumer complaints? Used Car Dealers? Contractors? Auto Mechanics? No, it’s the mortgage business, 87% of the complaints are all the same, the customer was told one rate and fees and ended up with something different, every one of them dealt with someone over the phone or internet!

Quick Quotes from Both Web Sites

“I was told I was getting a 5.625% 30 year fixed rate and my closing costs were to be $2949.00.  My husband and I get to settlement and our rate was 6.625% and our closing costs were $6912.00, I tried calling Tom but all I kept getting was his VM, my Attorney informed me I had to settle or the seller would sue us and we would lose our dream house”

“I worked for a company that got www.Lendingtree.com  leads. A guy there would quote the customer an outrageously low rate like your scenario and then work the deal.  In the middle of it he would tell them they didn’t qualify for the best program because LTV, too much debt, or some other BS.  90% of the clients closed with this guy because they were already into it with him.” 

“I too worked for a company that subscribes to www.Lendingtree.com, they would post rates that were so low they couldn’t possibly provide but the boss said “it gets the phone to ring” The Loan Officer training program consisted of how to quote low, get them to sign and during the process tell them they don’t qualify for the low rate advertised”

“The loan officer told me she could get me a rate of 5.75% with zero points, I needed to get cash out of my home to help my father who’s home was going into foreclosure, she told me not to worry she would help me. I received a call to say they were ready to close my loan BUT the rates have changed and she could not offer me 5.75% anymore, the new rate would be 6.875% with two points ($4300.00) I had no choice; I needed the money to help my father”

“We would tell them rates went up. Then would give real authentic sounded reasons why the rate went up”

“All of you guys are correct, 90% of borrowers will sign at the table no matter what rate they were told at application”

INSIST the loan officer attend your settlement.  It would be difficult for that person to “bait and switch” you if they knew they will be sitting across the table from you at your settlement. 

Would you hire a contractor without getting a written estimate first?

ONLY deal with someone face to face.  Have them show you rates and programs, and let them explain the different mortgage options that are available to you.  They should be giving you options.  Their job is not to tell you what mortgage program to take.  Their job is to explain the pros and cons of different loans, and YOU make the decision that’s best for you. 

You were “told” you were getting a 30-year fixed rate @ 6% and your closing costs were to be $3,000.00.  You’re at settlement, ready to sign for your new home, but the paperwork in front of you says 6.5% on a 2-year ADJUSTABLE RATE MORTGAGE, and your closing costs are $4,500.00.  What do you do?  The loan officer you’re dealing with is in Ohio, and you’re here in New Jersey.  You call and get his voicemail.  You call back and get his manager, and he says, “Sorry, I don’t know anything about your file.”  GET IT IN WRITING, UP FRONT.

If you walk out of settlement, you could be sued by the seller for breach of contract and, at a minimum, lose your Ernest Deposit. You have to sign.  ALL loan officers know this. Having your Loan Officer at your settlement would have avoided this. 

Mortgage Interest rates are like car insurance…….RISK EQUALS RATE! Your car insurance agent can’t just give you a rate because “you called and asked for one” BEFORE they can provide you with a rate they need to know….what kind car do you drive?…….how many miles back and forth to work?…….how is your driving record?….does your car have airbags?…and on and on and.......We in the mortgage business need information also before we can “quote you an accurate rate”

When you make a mortgage loan application and have identified a property to purchase or refinance, Federal Law requires mortgage companies to disclose to you within 3 business days of application what is known as a Good Faith Estimate of Costs and a Truth in Lending disclosure. Many Good Faith Estimates can be far from “good faith.” I’ve had clients tell me that other mortgage companies they went to before they found me actually told them that the Good Faith Estimate really doesn’t matter because it’s just an estimate. I know of others who have paid several hundred to thousands of dollars more at closing than originally told it would cost at the application or initial phone call.

Do You Want To Do Business With Someone Who Can Not Accurately Tell You What Your Costs Will Be?

Most of the excuses used something like this…. “It is only an estimate; we won’t know all the costs until closing.” If you ever hear something along that line, RUN DON’T WALK…….

A Good Faith Estimate CAN give you ALL the costs associated with your mortgage transaction. In fact, I GUARANTEE mine. Remember earlier how I said, “At what cost do you want the lowest rate?” This is the point where you discover what it is going to cost you to get that “lowest rate.”

For just a moment I want to explain closing costs and how they relate to interest rates. Some of the rates you see advertised can actually be obtained, others cannot. They are quoted to get you to respond. Let’s deal with the ones you can get. In the mortgage industry you can “buy down” your rate by paying what is known as “points” or “origination fees.” Origination fees and/or points are typically 1% of your loan amount (1% on a $200,000.00 mortgage = $2,000.00). You can pay as many points or as much in origination fees as your bank account will allow.

You have a right to this written commitment. All my clients are advised at application on whether they should “lock in” the rate now or “float.” A “floating rate” is popular when rates are heading down. Naturally when they are rising you want to lock. You need expert advice in making this decision. After you have been given your Good Faith Estimate and evaluated all of the costs associated with getting your interest rate, you should receive a specific lock-in agreement that gives you your loan amount, the time period that your rate is locked and if you are paying any points and/or origination fees associated with that rate.

This is an Extremely Important step in the mortgage loan process.

Without a written commitment you have only an implied rate that could actually be different at closing than what you were quoted at application. It can and has happened, where borrowers have thought they were “locked-in” at a certain rate, only to show up at the closing and find out different. This should never happen, but it does.

One last thing on rate locks and interest rates in general. Rates are typically locked for time periods that are as short as 10 days and for as long as up to 120 days or more. A rate lock of 10 or 15 days will give you a slightly better price than one for 45 or 60 days. The longer time period a loan is locked, the higher the rate will be. However most will quote 10 or 15 day lock pricing. You CANNOT lock a loan for 15 days or less until your mortgage has been completely approved with no conditions. In most cases, that process takes 15 to 30 days from the time you make application. The most common lock- in period is 30 days. You need to know, should your interest rate lock expire, you must take the worse case when you re-lock. That means if rates are higher, that’s what your new rate will be. When you work with me, you will never have to worry about the loan not closing before your rate expires.

I’m sure this may be a tad bit confusing.. Remember there are so many factors in the mortgage process to consider. You need the Expert Advice from someone like me, to help guide you and consult with you in regards to your specific needs. What the “rate is” is only one of your considerations.

In the past, the traditional way of obtaining a home mortgage loan was to go to our local bank. You might believe, “My money is in their hands, surely they’re the place to go” or “With all the other services my bank offers, they have to be the best place to get a mortgage.” Some may just believe that they are the most “trust worthy” place to get a home loan. In today’s “Mega Merger” environment, changes in personnel as well as “lending guidelines” are so common you may not even recognize the place from one week to the next. Do you really get customer service from your bank or are you just another number to them? All of this and more can lead to uncertainties that leave you frustrated and confused. Your Local Bank Is NOT What It Used To Be!

I don’t call that more choices, I call that a huge SWAMP! 

 Most of these companies haven’t been in business for 3 years. They say they save you money because they have “low or no overhead” and “they don’t pay loan officer commissions” (Does that mean the people you will talk to about your mortgage are the same experienced people who would take your fast food order?) Some even market themselves as a place where you can “bid” on a mortgage rate. This is really nothing more than calling around and getting ‘rate quotes.’ The only difference is, the computer does it. Mortgage money is not like airline tickets; hotel rooms or rental cars, where it’s discounted because it’s not being used that day or night. It should be noted that the majority of online mortgage companies are losing money everyday, most won’t be around in the future and do you really want to be passed around to someone different every time you need to speak with someone? A local home loan professional, like me, offers you the following service advantages: 1) I come recommended. 2) I have the experience to handle any complications that may arise, to find solutions to loan problems, answer questions you may have when they arise and 3) I will be available to help you throughout the transaction; and will be here for you even years later when you need help again. 4) I will come to your home or office for us to discuss FACE to FACE your mortgage needs. The biggest purchase of you life should not be done over the phone or internet, buy shoes over the phone/internet, not your Mortgage I live and work (Marlton/Medford) right here in South Jersey, also I OWN the mortgage company! 6) I attend ALL of my closings to explain your paperwork to you and if there are any problems I am there to fix them.  How is that phone/internet company going to attend your settlement when they are in California?

Time and time again, I hear… “Why didn’t the other lender ask me that?” “I didn’t know I had that option!” and “You mean I don’t have to pay this?” I believe the key to being asked the right questions concerning your mortgage loan comes from experience and creativity on the part of your mortgage lender. Earlier I stated that there is a big difference in the right mortgage vs. just a mortgage. There are nearly as many mortgage loan products out there as there are mortgage companies. Most homebuyers look at the 30-year fixed rate loan as their best option. In some cases this is true. But…Let me ask you the right questions and you may soon discover your needs call for something entirely different.

You may be a 1^st time homebuyer or you may have already bought and sold several homes. Regardless of your present experience in the home buying market, it is imperative that your personal and financial goals are taken into consideration when borrowing mortgage money. Many times I have had clients who had not been consulted on these matters and it cost them. They paid unnecessary closing costs, were given a mortgage with a pre-payment penalty, paid too high an interest rate, etc.

We are a highly mobile society and many of us will sell and move on average every 5 to 7 years. Knowing what your goals are up front is one of the many important factors that will determine what the best mortgage loan is for you and your needs. You need consulting you can rely on and trust. I will give that to you.

There are many emotional stages you will go through when buying your home. You will have so many people involved in the transaction it can be overwhelming and stressful. You will be dealing with your Realtor, Lender, Home Inspector, Title Company, the Appraiser and your Insurance Agent. This list does not include all the people behind the scenes like the Processor, Underwriter, and Closer. When you work with me you can relax and know that I am watching over your loan transaction, coordinating my team, and working with your chosen Realtor and the others that are involved, orchestrating the process like the conductor of a great symphony.

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