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Insider Tips
Part 1 Being an effective consumer and shopping for a mortgage can be a very difficult process for anyone. Since shopping for a mortgage is something most people do only a handful of times throughout their lives, it pays to be armed with the very best intelligence. In today’s market that is doubly so. As an industry, we have just come out of an all time record high refinance boom. With such a volume of business and no licensing requirements in Colorado, the last few years also saw a record number of new loan officers join the mortgage industry. But now that all of that easy business is gone, what do you suppose all those loan officers are going to do? Unfortunately, the answer may be to prey upon the general public. Traditionally, “bait & switch” referred to the practice of offering a rate and point structure well below that of any competitor. Once your loan application was made, processing of the loan would commence as usual. But somehow just 24-48 hours before your closing, you would get the “bad” news. The “sting” would either come out as a problem of yours or some mysterious investor. In other words, the investor didn’t like something in your file. Maybe you had a late on a student loan 7 years ago, or you lived in a high rise condo. But whatever the reason, you didn’t make the cut for the deeply discounted financing and would now have to consider a higher rate. The other way the “sting” might be executed involved blaming the mysterious investor. The loan officer would tell you that the investor ran out of funds, or withdrew their commitment, or had just closed their doors. The loan officer would be just as shocked and upset as you were, but there was simply nothing they could do, blah, blah, blah. But whatever the reason, you would now have to close at the higher rate the market was really offering. The worst offenders might not even offer an explanation, particularly if the transaction was a purchase. You might just go to the closing and find a higher rate (or different program, or both) waiting for you. The loan officer wouldn’t return any calls and the idea was that you had moving vans waiting and no choice left to you. So how do you protect yourself? There are a couple of things you can do. First of all stick with lenders you have a reference for. Call the Realtor you used when you bought your house in the first place, or call a couple of local title companies and see if they have ever heard of the loan officer in question. You might even call the loan company in question and speak with a different loan officer, to see if you get the same quote. In addition, have a back up in mind that you are prepared to use. I know I certainly am willing to process a parallel file for clients in this situation, and I think most reputable lenders feel the same. Just telling the suspect lender that you plan to have a back up file processed by a competing lender will tell you a lot. Rest assured that if I had the best rate in the market place, I wouldn’t care how many parallel files you had going. I would be more than happy to share the appraisal, just to make sure you were comfortable. So if your suspect lender has a real problem with that concept, my recommendation is that you turn and go the other direction. Is there ever a real “deal” in mortgages? The answer is yes. Many credit unions dabble in mortgages, and from time to time offer below market rates to their members. Sometimes there is a private investor involved, in the form of a pension fund or insurance company. In these relatively rare cases as mentioned above, the lender should have no problem disclosing that fact. They will be happy to tell you who that investor is and happier still if some other lender processes a parallel file to “keep them honest”. The bottom line is that they will understand your concern and trepidation. They will do what it takes to make you comfortable with making the choice to use their services. Next month we will look at the ways “bait & switch” has evolved into some new areas, and additional ways you can protect yourself. For expert advice on this or any aspect of home finance, contact Dan Smith. He can be reached at 303-674-2205 or feel free to visit him at www.ColoradoHomeLoans.com © Copyright 2004-2007 by ColoradoHomeLoans.com |
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