Tips for a Stress Free Mortgage Process
From the shopping phase to the closing to watching your mortgage after you close,
here are some tips that will make the entire process a little more stress free!
Follow these
tips and read my article about How to
get an accurate Mortgage Quote to save yourself some money
and some stress. You will protect yourself from any surprises and become the
savvy mortgage shopper that we all want to be.
- Before you even start calling, get a credit report! Preferably
one with credit scores.
from Experian (formerly TRW) at 1-800-682-7654, www.experian.com
TransUnion at 1-800-916-8800, www.transunion.com
or Equifax at 1-800-685-1111. www.equifax.com
You can also go directly to your mortgage professional, or even myself to
obtain this report and to make sure that everything looks good.
First, you have plenty of time to correct any mistakes.
Second, you will know your credit rating.
Read my article about Credit
Scores to see what they mean.
If you already have a mortgage professional you work with and find a problem,
expect a 30 to 60 day delay in the mortgage process to fix a problem
- Shopping for your Mortgage
Why is it that many otherwise savvy shoppers choose a Lender on the basis
of such great thinking, like, "We have banked there for 15 years," or "I've
seen their ads on TV."
or worst of all....."They had the lowest rate" or "They had
the lowest costs"
The first objective of shopping for a mortgage should be finding who
you can trust.
The second objective should be finding out what the best mortgage is for
you. Remember this as you shop!
There is a right way and a wrong way to go about mortgage loan shopping,
yet some estimates say that up to 80% of people go about it the wrong way!
Shopping for a loan the right way can
save you a lot of money. Shopping for a mortgage the wrong
way not only can cost more money but can leave you open to being taken advantage
of.
Most people get confused by the staggering array of choices and that's why
they don't get the best results. Everyone you call has this "better
dea!" and that makes it very hard to do the shopping. There may be
a better way for you to save money, so be open to options, but stick to
your guns when you are doing the shopping! Ask for exactly the same thing
from every one or you will never know who is really giving you the best
deal.
If you do decide that one program really is better for you than the one
that you started looking for, that's ok. You can always start the shopping
over again. A few extra minutes or even hours on the phone is nothing compared
to making higher payments for years to come. Even if you start over again,
the list will be shorter since you likely have a real good idea of who you
won't do business with regardless of the price.
Do give extra credit to the person who came up with the idea of a great
mortgage program for you and as long as rates are the same, you should go
with that person and reward them for being more creative and helpful to
you. However, it never hurts to make a few extra phone calls just to make
sure they gave you a good deal.
- Do NOT call a bunch of lenders and ask, "What are your rates?"
Almost every lender has at least a dozen programs, each with 10 or more
rate vs. fee alternatives. That's over 100 choices.
Many lenders quote a program which was designed specifically to snooker
the telephone rate shoppers. It will "sound good" because it was designed
to "sound good."
Other lenders - some people estimate higher than 50% - simply may not tell
you the truth.
Some Loan Reps purposely lie to phone shoppers in order to induce borrowers
to apply with them.
You are not smart enough to "catch them."
Be careful with "Zero Cost" loans. Read my article about no
cost loans here.
These can be great for your situation, but Remember - Nothing is free!
- Your objective is to find a lender you can TRUST.
Ask advice from your friends, co-workers, neighbors who are homeowners.
Some of them will have had positive experiences with a lender. You need
to assess the competence and communication skills of the Loan Rep who will
be handling your transaction.
I would avoid the huge institutions which hire Go-fers for $7 per hour and
call them Mortgage Consultants. They don't know much and have no power within
their company. You want a rep who is making a commission and whose paycheck
depends on you being happy. Any rep who does not understand that they make
more money from the 5 friends you will tell about the great experience is
not in it for the long run and is likely not in it for you.
- Determine which loan program is best for you.
Listen to the options that reps tell you about with an open mind. There
are so many programs out there that the one you have chosen really might
have a very good alternative (even those who you have no intention of working
with!)
Just remember, that even though something may sound better, the bottom line
is how much will it cost you. A good mortgage professional will take the
time to show you not only how will you save money, but also the possible
disadvanted of taking a different program.
Here are three very simple guidelines to follow for choosing a loan program.
First, do NOT pay for 30 years of expensive rate protection (what the 30
year fixed rate loan does) if you are only going to be in your home for
5 or 7 years. Consider the options.
Second, if you are a Teacher, a retired Minister, or someone with an uncertain
job future, you are in no position to take risks, you need a fixed rate
loan.
Third, if your income is rising, if rates are falling, an interim ARM fixed
for however long you intend to be in the property may be more suitable for
you.
- If you choose an ARM,
be sure to ask and understand which index your interest rate will be tied
to once the rate begins to adjust.
- If rates are rising, choose a loan tied to a lagging index such as the
11th District Cost of Funds.
- If rates are falling, choose a loan tied to T-Bill's, CD's, or LIBOR.
Re-fi when the rate environment changes.
Read my article about ARM
programs
- There really should NOT be a big difference in Rates and Costs
For the common programs, the differences in rates between reliable Lenders
is minuscule. If it's not, then don't be afraid to ask why! If there is
a legitimate answer, you will be able to tell.
For example, most Conventional loans are sold to FNMA or FHLMC which buy
loans from 24,000 banks, S&L's, and mortgage bankers. Each of those 24,000
lenders have the same "cost of funds" on any given day. You want a lender
who will "sell" you FNMA money at the lowest mark-up.
(Remember what I said about Trust?)
Now, there are times when one bank or lender will lower the markup on a
cretain product and give a special and there is where a broker can come
in handy. They will have access to the different lenders and a good mortgage
professional will keep up on those differences.
- The Good Faith Estimate
Your lender is legally obligated to send you the RESPA and Good Faith Estimate
of Closing Costs within 3 days of application. Insist on this!!!!
Read them and ask questions until you understand them.
While this disclosure is not binding on the Lender, it will show the costs
and fees on the program on the date you applied, a good starting point.
- Getting your Rate Locked in
Many people think that their rate is locked in at the rate shown. This is
not the case! You must sign a rate lock sheet in order to guarantee your
rate.
You need to find out your lender's lock policy. The market can change rapidly.
Do they need it in writing or can you lock in over the phone and sign the
lock-in sheet after the fact?
Developing and executing a good lock-in strategy is very important. Make
that strategy clear to your mortgage professional so that they can work
with you. Don't surprise them later with "I intended to lock in at
that rate"
Stay in contact with your mortgage professional.
Set up a schedule to speak with them on a regular basis and stick to it.
Bottom Line on Locking in your rate? You have to make the payments,
not your mortgage professional.
Advice is great, but the market moves sharply at times and nobody can predict
those movements very far in advance. I have seen rates jump up sharply too
many times with absolutely no notice. More people who have tried to get
that extra 1/8% lower have been disappointed than have been satisfied.
When you get a rate you are happy with, lock it in!
- Mistakes can be made
The mortgage industry has grown so fast that a number of the people in the
industry are new to their jobs. This is not an excuse for people, just an
explanation as to why you need someone you can trust to work with.
A good mortgage professional may make it seem smooth and will, of course,
never make you aware of a problem. A good mortgage professional will let
you know of an issue that will hold things up and take care of it so that
you get the same terms you signed up for.
If there is a glitch, roll with it. You would rather have things right thatn
to pay for it for 30 years.
- About the Closing.
Your Mortgage Banker will call you when loan documents are delivered to
them to set up a closing time. They will be ready to go, but don't be afraid
to set the time back in order to get all the documents to review. This can
be difficult since many title companies do not prepare the closing documents
until the day of the closing, but don't be afraid to reschedule if they
are not right.
Bring to the closing the initial good faith estimate you were given.
Compare this with the settlement statement.
Expect minor discrepencies. (A good mortgage person will have already told
you!)
In the event there is more than a minor discrepancy, be willing to grab
your coat. A good mortgage professional will be ready to grab theirs too
and come back when the numbers are right.
Not everybody is perfect, mistakes can be made. It doesn't mean that you
have to pay for them!
If you see the letters, "P.O.C."
It means that an item is being Paid Outside Closing.
Either an item was already paid (like the appraisal or any costs you agreed
the bank or broker will pay for you OR it means the Mortgage Broker is getting
paid something in addition to their Loan Origination Fee.
That's OK if the Origination Fee and the amount P.O.C. add up to what you
agreed upon.
(e.g.- 1 point Origination and 1 point P.O.C. is OK is you agreed that they
would make 2 points)
If you made no arrangement in advance and that fee is in the 1% to 1-1/2%
to 2% range of the amount of the loan, you can still accept that you got
a good deal on your mortgage. Anything less than 1% and you got a Great
Deal.
Lenders who are not honorable - there are some - are used to blowing off
people who just complain a little. There are some companies who intentionally
add to the fees and hope that you will sign the papers rather than get up
and walk out!
- Keep
an Eye on that Payment after you Close!
Most people just don't pay attention to their mortgage. The bill comes every
month and they just pay what it says to. They do not remember what the rate
is and if it's an ARM, they are only dimly conscious of the variations.
Every year, Lenders make millions of dollars of profit off of people
who weren't aware that somewhere along the line they could have re-fied
into a lower cost loan.
Here's some good advice: develop an active relationship with your mortgage.
Write down the key features of your loan and pay attention to the market.
Since you have found a lender you can trust, ask them to keep you informed
of developments which could be of benefit to you.
Summary
These are 10 mortgage tips to get you well on your way to being a savvy mortgage
shopper!
Always remember that in shopping for a mortgage that although the end result
will be a great rate with great costs, the first objective is to find someone
you can trust and the second objective is to find the program that is best
for you. If you have found these tow, the great rate and costs will follow
right along.
There are some terrific Mortgage Professionals out there and if you are pleased
with yours, reward that person and his firm by referring them to friends.
If you are dissatisfied, there are a Regulatory bodies in every state and
HUD in Washington who can examine cases of irregularity. Don't be shy. Our
industry would be a lot better off if people DID complain when they are abused.
DailyInterest.com
is brought to you courtesy of Scott Campbell of
30800
Telegraph Rd, Suite 1801
Bingham Farms, MI 48025
|
|
Residential Mortgage Lender in
|
|
Alabama
California
Colorado
Florida
|
Georgia
Illinois
Indiana
Kentucky
|
Michigan
Minnesota
Mississippi
Missouri
|
Ohio
Oregon
Tennessee
Wisconsin
|
|
|
DailyInterest.com -
guide to Home Mortgage Loan Advice & Education for refinancing and purchasing
All Information located here is Copyright © 2002 - 2005
Home Loan
Programs Tips
and Learning Library
About Us Market
Trends & Rates Apply
Now
