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[When the Consumer Says] "I didn't know..."

I had a pre-payment penalty
I had an adjustable rate mortgage, (or worse yet)
I had a negative amortization (Neg. Am) loan
I had to pay my taxes separately. I thought they were included in my monthly payment (an impound account)
My closing costs were rolled into the new loan balance
I had the option for lender-paid mortgage insurance
I could Lock-In my rate during the application process
I could use Gift Money as a source for down-payment
I have three different credit scores (Equifax, Experian and Transunion)

[Note: what am I missing from the list? Care to add anything on the Real Estate Listing and Buying side?]

As a consumer, do you ever feel like you fall into one of these scenarios?

To be better prepared/more informed, all you have to do is pay attention to what you're committing to on paper and ask yourself whether it makes sense for you. This includes reading the fine print and asking questions where necessary. If you're not getting any answers, you're probably working with the wrong professional.

Why the rant?

Because the Federal Trade Commission conducted a study for the Federal Reserve wherein the following results were obtained:

"Of those surveyed, 25% could not identify the annual percentage rate of their mortgage, and 25% could not identify the amount of settlement charges. Half could not correctly identify the amount of the loan. Two-thirds were unaware of prepayment penalties that could be charged during refinancing. Three-quarters did not recognize that the loans included charges for optional credit insurance." [Source: Forbes.com]

Articles of Interest:

Daily Mortgage Rate Update: May 14, 2008

Understanding Mortgage Rate Locks

Posted by Ricardo Bueno on 05/15/2008 02:12 AM

Comments (14)

brokers insight

Originally posted at: Ricardo Bueno's Blog : [When the Consumer Says] "I didn't know..."

Post is included in group: Realtors®
Post is included in group: Mortgages

14 Comments on [When the Consumer Says] "I didn't know..."

MAY

2008

........ "If you're not getting any answers, you're probably working with the wrong professional.'

That speaks volumes, Ricardo.
It's not only true in Real Estate but in all businesses!

All the more reason for me to leave the financing to the Professionals in the mortgage business, and, in turn, concentrate on the professional aspects of my business - - real estate.

Nancy: I agree entirely!

Susie: What I meant to portray through this post is the various circumstances home owners find themselves struggling in. Often times they come for help saying, "I didn't know I had a prepayment penalty. What can I do?" Homeowners can avoid this many (often painful) circumstances by educating themselves early and asking questions from the start. If they're not getting answers, that should be the first red flag!

If your qualifued to buy a home,car, or anything else by using your credit there is some kind of contract to sign...Read it.

Greg: true story... A client of mine calls me and says, "Hey Ricardo. I just bought a new car. (To which I initially reacted in a congratulatory manner) But after thinking about it, I'm just not sure about the payments and the color. I've thought about it over and over... And I want to return it. They forced me into buying it ya know. Can you come with me?"

There are signs EVERYWHERE in the dealership stating that when you buy (sign the contract and drive off the lot), you can't return the car for a full refund. it just doesn't work that way! These signs are plastered E-V-E-R-Y-W-H-E-R-E-!

Ultimately I can't help but feel bad and sympathize but it only reinforces the point of looking at the fine print, asking questions and reflect on whether or not it makes sense to you right now.

Thanks for stopping by Greg...visit again anytime!

Discount points.

Many consumers don't know that they can pay discount points to have their interest rate lowered AND that the seller can pay it on their behalf.

Ricardo, I've found that most consumers just don't know the questions to ask. A good loan officer will guide them through the process answering questions they didn't know to ask. I'm sure that your clients know their loan inside and out when they work with you!

That is a pretty good list of I don't knows I have heard several times.

I would also caution to say that when you go over it with them under the ether of purchase THEY DONT REMEMBER because of the excitement.

Ricardo This is a pretty good list and the Pre-Payment at the top, I hear over and over again. My question to them is didn't they go over this with you?? Nope, no one explained it to them. Consumer have to be more alert to the papers and contracts that they are signing!!

Many consumers fail to read loan papers or are so glad just to refinance or buy a home that they don't take the time to understand the loan.

Buyers might also not know or be afraid to ask questions. They might not understand everything being told to them, so instead of speaking up, they just sign away.

Hi Ricardo

Great post. You are busy;great people are always in demand.

All my best!

Tom Braatz

Kris: ahh, good ol' seller concessions! Great point and thanks for the reminder :D

Linda: thanks for the kind comment. I urge people to ask questions (as silly as questions may seem) so that they walk out confidently.

Randy: Aloha! Thanks for stopping by...

Chip: I agree... And often times, it's in our nature to be trusting individuals so we let our guard down under the assumption that the person helping me is going to steer me in the right direction. As for me, I utilize my blog as a way to follow up and keep people informed about the market and other terminology they should be aware of.

Jeannette: Unfortunately I've met many new prospects who were not aware that they had a prepayment penalty. In some cases, the issue didn't come up until we ordered a pay-off demand.

Russ: so true...it just hi-lights my point that we're (as consumers) often very trusting individuals and so it's easy to confide in the person helping us to be honest and help us through the process. Unfortunately it doesn't always work out :-(

Rob: I think that's where our blog presents an opportunity as a great follow up/educational tool. They can read along without being scared to ask questions.

Tom: thanks for the compliment! (And I appreciate your feedback on LinkedIn as well)...

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