Do you feel like you are sometimes back in time when shopping for a mortgage? Is it because you have now talked to 5 different lenders and nothing seems consistent? How is the communication level when shopping good faith estimates? Does that loan officer just give you want you think you want to hear?
Let's look at one major contributing issue when shopping for a mortgage. "If it's too good to be true, then it usually is." Do you think that you are a savvy shopper because you think you know what you are asking for? Do you think by asking for the APR (Annual percentage rate) that this will tell you the whole story in regards to your Good Faith Estimate that you just received? Companies can manipulate the APR also.
Just asking for rate and the lenders fees is a combination that could be deadly. If you are talking to a mortgage professional and not just an order taker, they will want to spend some time analyzing your situation, your needs, and your goals. It's a lot more than just rate and fees. Why? Your goals. Anyone can give you a rate and fees. But can they give you examples of what might be better for you, break down scenarios, and explain them in detail?
Is the good faith estimate worth the piece of paper that it is written on? I could promise you money on paper, but would I deliver? Here are some things to ponder about when shopping for a mortgage.
- Have you been approved? If you actually don't qualify for the mortgage, then that good faith estimate is actually null and void.
- The rate that has been quoted to you can be misleading for several reasons. Have you found a house yet? Is the loan officer giving you a 30 day rate which means that it would only be good for 30 days, when you might be settling in 60 days? Have they gone over the rate lock requirements? Or since you didn't ask and they didn't offer, could you be floating the rate? Keep in mind, rates change daily. So if you received 2 rate quotes one day and two more the next, the market could have moved enough to have made a difference in comparing these GFE's. (Good Faith Estimates)
- How accurate is your GFE? Some loan officers have a tendency to skim costs, cutting back on the escrow charges (taxes & homeowners insurance), and/or title insurance fees. Rhonda Porter gives a good example of this. Please read : Reserves and prepaids on the good faith estimate I have had this happen to clients in the past. If you are just looking at the total monies to close, this could be lower by thousands of dollars. The excuse will be, "it was just an estimate. They are 3rd party charges." This is a lame excuse because any good loan officer would be able to give a very accurate cost scenario even on 3rd party charges.
- And the biggest red flag out there...... if it takes the loan officer a few days to get you a good faith estimate. Better yet, they tell you that they can't give you one until you have signed contracts, agreement of sale. We all have access to e-mail as a loan officer. I can e-mail or fax your good faith estimate to you in a timely manner. Keep this in mind.
Reminder : Bring your good faith estimate to your settlement, close of escrow. Usually, any good loan officer will have the closing instructions to the title company/escrow company/lawyer a day prior to settlement. That agent representing the closing should be able to do a quick HUD-1 settlement sheet for you prior. If this is the case, then you can compare all costs the day prior to settlement. A few dollars here and there is acceptable. Any added fees or more money in regards to the points is usually not acceptable. Call your loan officer ASAP. If you have trouble reaching them that day, call their office and ask to speak to their manager. Don't wait until you are at the settlement table.
For a better understanding, please read these required posts :
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Copyright © 2007 by Jeff Belonger
I rarely deal with shoppers, but when I do, I ask for their good faith estimates. The biggest issue regarding deception is manipulation of pre-paid items (taxes, insurance, interest) and title/escrow fees. I have seen other lenders as well that don't include fees that are standard in the calculation of APR.
If consumers were smart, they would shop for someone they could trust, rather than shopping for a rate. The GFE and TIL are poor comparison tools because they can be manipulated.
Oh...Rich is right on the money....and what he said.....
If consumers were smart, they would shop for someone they could trust, rather than shopping for a rate
This would definitely solve a lot of the problems....
RICH..... in a perfect world, I think many of us wouldn't want to deal with shoppers. Even if a realtor that I work with closely sends their client my way, people will still shop. Not all.... but those that shop even after being referred to, seem to hear from their father or family members, telling them to check around.
But you are exactly right, the biggest deception are the pre-paid items. And as I stated, the miscalculation of the APR. Overall, shopping with someone that they trust is the hard part from a consumers perspective. When you have a loan officer that says they promise, guarantee, etc etc.... what is the consumer suppose to believe then? Yes, getting a trusted referral. But sometimes it's the pride thing and they want to do it on their own.
SALLY.... I totally agree and I know you and so many realtors would also agree. In regards to this post, it's just to educate the averag consumer. I don't care if they are savvy, not college educated, or someone with a MBA.... you are dealing with a sales person. And some of these loan officers are just that. Thinking of the almighty dollar and not worrying about ethics, honesty, and good customer service.
MISSY.... I totally agree. But if the borrower doesn't know the lender or if they were referred to the lender, then they to know and definitely understand the red flags, what they need to look for. And as you stated in regards to your lenders, I also over estimate the total costs.
JENNIFER..... I agree and we know better because we are in the business. But I can't tell you how many times that I have talked to a client that doesn't ask for a payment or know that they should be asking for total fees prior to closing. And when they don't ask, most people that they deal with fail to supply this information also.
JASON..... what is the GFE? lol Yes, that's the sad part. Misunderstood by the industry. Even those in this business don't know the ins and outs very well. Hence why the client is left in the dark at times.
Jeff,
This is the best post on shopping for a lender that I've seen...consumers should bookmark this!
As an 'insider' who sees many different lenders, I know pretty much where I can consistently get the best rate, with the lowest closing costs...I know the 'teasers' and the 'ticklers' too! At least in my area!!! Thanks, Fran
P.S. Jeff...sorry about the foulup! :^)
I tell my borrowers all the time to get the GFE even if they dont use me. What usually happens is that after every lender they talk to, they call me to go over it and then in the end come to me. I encourage and almost dare my borrowers to look around. That way, in the end, they feel that they got the best deal for themselves. My quote to borrowers is, "I want you to make an educated decission and I am not here to SELL you a loan, I am here to service your needs."
Thats my 2 pennies, Palm Springs Loan Guy, Charles Dismuke
FRAN..... thank you very much sir for those kind words. Did you get a chance to read this one? Good Faith Estimate -- What to look for when shopping...... I think this one might be better. In any case, don't worry about the other thing.... lol
LISA.... the problem with the word estimate is that some loan officers will abuse this and/or mislead the consumer. But there is no reason why you can't be around $300 to $500.... I probably average about $200 off... and usually for the worst case. So the client is happy. My best was about $17 off or less.
CHARLES..... just going over the good faith in detail can be an education in itself. And then the consumer can at least go back to the other lend and ask the appropriate questions. Your 2 pennies are worthy.. thanks
FAINA..... thanks... I totally believe in educating the client and seeing what fits. As I mentioned, understanding their goals is key and not just what they think they want.
RANDY..... I know you do.... lol but when you come across a good loan officer, all the pieces of paper that you mentioned will be very accurate and legit. thanks
As a Notary Signing Agent, I can not tell any of this to the borrowers but it appalls me at the number of times I have gotten to the table with the documents, the borrowers have talking to the same lending institution for months, and they have never seen the GFE until I bring it out along with all the other documents to seal the deal.
These are the ones that will invariably ask me if they have a good rate. I can not answer that question and it is one they should have answered for themselves long before closing day.
MARY.........I hear it often from other title clerks and from clients that this has happened to. It also appalls me and it still happens now... sad...