Perhaps the easiest part of buying a new home or refinancing your mortgage is sitting down with the title company at the end of the process. Figuring out the labyrinth of shopping around and getting the best loan program and interest rate may be one of the hardest parts of the home buying process.
In a recent poll analyzing a homebuyer’s ability to understand what their mortgage documents say found that very few of the folks polled knew what any of their paperwork meant. This is a scary thought for a number of reasons. There is nothing better than a great mortgage and nothing worse than a bad one. A bad loan can give you years of grief if not financial disaster. There are some things to know that will give you some the upper hand when going up against a veteran loan officer. This is the information that they do not want you to know.
1. If the loan officer is doing their job correctly you should get a Good Faith Estimate (GFE) and Truth in Lending (TIL) statement from them shortly after completing a loan application; typically within 3 days. The GFE estimates the fees that you will have to pay to get the mortgage. The TIL shows you information about your payment, finance charges, rate and prepayment penalty information and the APR. If you are purchasing a new home, you should also receive a HUD publication called Buying Your Home, Settlement Costs and Helpful Information within 3 days of your loan application. If you receive this information, make sure you read it. It will help you during the loan process and it will keep everyone honest because you’ll be able to ask intelligent questions about fees, programs etc.
2. The US lending laws are a little confusing as there are several interpretations in the US lending laws as to what is considered a loan application. With the different interpretations, mortgage professionals do not always do the same thing so use this guideline to ask about your GFE and TIL. If you give the loan officer your name, social security number, home address (if you are refinancing), property address (if you are purchasing a new home) and income information they can make some credit determination. With this in mind, you should get a GFE and TIL, if you do not get them, ask for them. At the very least, knowing that a GFE exists ought to be enough if you ask about one to get one from your loan officer.
3. Closing costs fees are everything found on your GFE. Unless you are getting a “no closing cost” mortgage, you should see charges in just about every section on your GFE. If you do not see fees in the taxes, title, impound (escrow) sections you might not be getting the whole truth about how much your mortgage is going to cost you. I am sure there are mortgage professionals that would argue tooth and nail with me on this, but if they don’t want to tell you all the costs of your mortgage, perhaps you should find another mortgage person to work with.
4. Remember all things in life are negotiable except death and taxes. When you look at your GFE, just about everything that your mortgage loan officer charges is negotiable (application fee, credit report fee, processing fee, loan origination fee, mortgage broker fee). You might even be able to get them to negotiate the lender underwriting fees. Title fees can be negotiable as well. This is something that your loan officer has no control over however. There is no law that says that you can’t call a few title companies to see what they are charging. If you are doing a refinance you can definitely get a reduced rate on your escrow fee and title insurance. All you have to do is ask. Remember taxes are not negotiable, so expect to pay them. If you have to escrow your taxes and insurance, these are not typically negotiable either.
5. If you have good credit you should not have to pay loan origination fees or loan discount points, nor should you be charged a mortgage broker origination fee. You might want to pay these fees if you want a lower interest rate. If you get your GFE and see these fees (typically in the first section of the GFE) and you are not offered a higher rate option if you do not want to pay those fees then you should ask about it. Your lender might be padding their pocket if you are being charged these fees, especially if you have good credit. I recently heard from a colleague that his company closed a loan for a customer who was quoted 6.875 and 3 loan origination points from a very large lender who has been in the news lately and his company closed the same loan for 6.625% with no points.
6. Interest rates change everyday. If you are trying to compare rate quotes from different mortgage companies make sure you compare interests from the same day. Just like I just wrote interest rates change every day; sometimes they change a couple of times a day. I recall a day when rates changed 4 times up. I call this particular day – the Cardiac Rate Day.
7. Go with your gut! No one ever has the best rates – ever. If a loan officer tells you that they have the best rates – run. Let’s say that everyone gives you the same rates and fees, who do you pick to do your loan? Well if you were referred to someone, you will probably pick them because you know someone referred you to them; they must have done a good job or had good rates and fees. But if you weren’t referred, who would you pick? I would pick the person who I “liked” on the phone – by something they said, how they talked to me – something about them that I says to me that I could trust them to do my mortgage. I call this your gut. I say this is the way to pick your mortgage loan officer every time – go with your gut because we all can get the same rates if you call around enough on multiple days.
8. You do not have to pay any fees up front to start a mortgage. Paying this fee does not guarantee you a better loan and there are plenty of great mortgage loan officers out there who will work on your loan without charging you this fee.
I hope this article raises your awareness and makes you a better consumer when it comes to geting a mortgage. Do your homework and compare. If the deal does not feel right then walk away. There are thousands of loan officers out there. Do not feel stuck in any situation; you can always go somewhere else.
Source: http://www.ArticlePros.com/author.php?Dale Stouffer
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