Shop till you drop - this might not be wise advice when shopping for a mortgage
I wanted to bring up this topic because it still happens more than it should. I know we all want the best deals, but anyone can make general promises on the phone or on paper.
Shopping for a mortgage in New Jersey is not easy and it's not like shopping for a car. A car is a car, but ones service could be better. And one could argue that most mortgage companies should have the same interest rates and mortgage programs. But there are way to many unknowns upfront that can change interest rates. In my opinion, those that don't want to ask all of the appropriate questions upfront and educate you about the different types of programs, generally just want to get you in the door and then worry about everything later. Yes people, this still happens, even after several changes in the last year that try and protect the consumer when applying for a mortgage.
I read this comment from a realtor - "I tell my clients to shop loans and make sure the lenders provide the information about costs and fees associated with the loan. I think that is a service to my buyers."
I am sorry, but this kind of statement is like pointing a gun at your head that holds 6 bullets, yet 3 bullets are loaded. Your chances of being shot are 50%. Just like when shopping with to many lenders, that it could increase your odds of not getting the right information or misleading information and rates/fees.
Here are two quick stories -
1. I had a realtor that decided to give me a chance, yet she told me that she had 2 very good loan officers that she recommends all of the time because they were excellent and that they closed her deals. After speaking to this borrower, who already spoke to the other 2 loan officers, I realized that this borrower was never explained on how adjustable rates worked. Yet he was sold on an adjustable rate, because the rate itself was very attractive. The funny thing was that I was about 1/4 percent cheaper in interest rate and $1,000 cheaper in points on the fixed rate. But on the 5 yr arm, this lender was beating me out by 3/8 of a percent. He chose the loan officer with the lower rate, even though he thanked me for educating him on adjustable rates, going over his goals (which neither loan officer did), and just for the fact that I taught him about refinancing in the future. See, he was under the impression with FHA loans that if he refinanced 4 years later, as long as he had 20% or more equity, that he wouldn't have monthly mortgage insurance. This is 100% false on FHA loans. But see, I went into great details, knowing what he was trying to accomplish in the future, and because we went over his goals. Yet this was never talkied about by the other two loan officers.
End Result - 1 day after he applied with this lender, rates began to drop. By the end of the week, I was barely 1/8 of a percent higher in rate, yet this other loan officer never offered a lower rate since rates dropped. Yes, many loan officers/lenders can offer you good rates and such, but at what price to the borrower. And sometimes these costs could add up as future costs and not as present costs, hence why goals are important. And in my opinion, this realtor really wanted to give out 3 names just to protect herself. If you really trust one person, there is no need for 2 other names.
2. A person that I have know for 3 years has said all along that I was his guy. He trusted me and such. I have done over 5 pre-qual letters for him in the last 4 months. Well, that turned quickly and he ended up using another loan officer that his realtor pushed, because the other lender made it look like I wasn't doing my job. He told the borrower that we didn't order the appraisal as of yet and his total costs were $800 cheaper than me. I tried to explain that I always try to be on the high side. Besides, I had no lender fees, so I knew this couldn't be true. Also, the loan officer had offered a lower rate after I told the realtor what I was giving the borrower. But wait, the borrower was floating and I wanted to surprise my so-called friend later on with a lower rate.
The end result? I could have given this borrower a 1/4% less in rate. And wait, just yesterday he was told that he needs $400 more at closing tomorrow for escrows. hhhhmmm - Who lost here? We both did. But I just called this person and told him to fight it at closing tomorrow, because the lender didn't disclose the new update 3 days prior to closing. He was appreciative, even though he went some where else.
Conclusion - All the reason why shopping for mortgages in New Jersey with many lenders could backfire on you or just hurt you overall. I wrote a series about this. So who do I trust?
Some important reading - Some changes in the last 12 months by the government, trying to protect the consumer when it comes to shopping for mortgages. But has it really helped as much?
- The MDIA - The Mortgage Disclosure Information Act - Effective July 30th, 2009
- I wrote about this same topic on October 25th, 2006 -
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For more information on FHA loans, please go to this link. The FHA Expert
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!
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Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc
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