A Special Report on How to avoid them and save thousands of
dollars.
1. How they choose their lender, many people make the
mistake of calling on an advertisement or calling their
current lender, thinking it will require less documentation
(appraisal, tax returns, etc.) because they already have an
existing loan.
First of all, most good advertisements are made to sound
attractive to entice you to call, but they don't disclose
all the facts about the loan, such as prepayment penalties,
high cost, or adjustable rate features. As for your
current lender, they don't know you from the Man on the
Moon. All loans are made to be sold as part of a
securitized investment once the loan has been made.
Therefore every new loan must be packaged for sale and will
require current documentation; i.e. appraisal, income
documentation, etc.
So, how to choose? Your choice of lender should come as a
referral from someone you trust who has used their services
personally.
2. How they select their loan program, most people don't
realize the wide variety of loan programs that are
available and how to select the one the best fits their
personal needs, goals, and qualifications. Many of my
clients ask me for a specific loan program, such as a
thirty-year fixed, but when I ask them about their future
plans, I find they have no intention of keeping their home
for more than a few years and could save thousands of
dollars by selecting a shorter-term fixed at a much lower
interest rate. As an example; if you were to select a 30
year fixed rate on a $300,000 loan at 6%, the payment would
be $1,798.65. But if could obtain a five year fixed at
5.5% the payment would be $1,703.37. Over a five year
period that would be a savings of $5,716.98.
3. How they decide their loan costs; okay, so let's say
you've successfully chosen a loan program that you are
qualified for and that you feel provides the right
financing for your personal needs. Making the right
decision about how many points to pay, if any, and
understanding all the costs involved with the loan is
critical and could save or cost you tens of thousands of
dollars over the life of the loan.
It is possible to get a mortgage with no points or fees
(i.e., no cost), and it is possible to pay thousands for a
loan. If you are only focused on the payment, or only on
costs, either way you can make a poor decision. As an
example, if one point (which equals 1% of your loan amount)
was $3,000 on a $300,000 loan, and that one point was going
to buy you a payment that was $100 a month less than a zero
point loan; then all you need to do is divide $100 into
$3,000 to realize that it would take 30 payments, or 2.5
years to recapture your initial investment of one point.
Whether that is a good investment or not depends on your
long term plans for that property, the longer you keep the
loan the better an investment it is.
4. How they get bait and switched I have heard many horror
stories over the years of how a borrower was promised one
thing, and then got to the closing table only to find out
that the loan program or associated costs were not what
they had been led to believe.
People wonder how this can be possible with all the laws
requiring proper disclosure. There are many reasons: few
borrowers actually take the time to read all the
disclosures or to really understand them, even if they do
some lenders send out incorrect disclosures, and some do
not send them out at all.
5. How they decide if a home loan is affordable just
because you can qualify does not mean that the loan is
advisable. Like a good financial planner or CPA, I feel
that the advice you receive, or don't receive from your
mortgage professional is critical to making a sound
decision in deciding if a home is truly affordable for you.
It's easy for people to get caught up in the excitement of
owning that new home; it's just as easy to talk them into
the loan that has the lowest payment, not to mention the
highest commission for the loan officer. This is why so
many folks took "Subprime" or "Option ARM loans, often
these loans will have an interest rate that is higher than
a fixed rate loan, but because the payment is so low
borrowers are enticed to take them.
In closing, you can see that finding the right lender for
your home purchase or refinance is not as simple as
purchasing your appliances. You don't just pick the model
and color and then shop around for the best price. Most
people would never consider choosing a doctor, daycare, or
attorney based on the lowest price quote, but since few
people truly understand all of the complexities of mortgage
finance, they don't think twice about who can really save
them the most money and provide them with the best loan
package, tailored to their personal needs and
qualifications.
Kyle Dawson, Regional Vice President, Milestone Mortgage
----------------------------------------------------
Kyle has been in real estate lending since 1989 and is a
licensed Real Estate Broker through the California
Department of Real Estate. Kyle has owned several mortgage
companies and has personally originated and closed hundreds
of real estate loans. Kyle is presently a Regional Vice
President for Milestone Mortgage Partners and resides in
Alamo California with his wife and their three children.
No comments:
Post a Comment