As some of you know, I only have a few major pet peeves, but one of them is false or misleading disclosures, or not disclosing at all. Especially when it comes to FHA loans in New Jersey and FHA loans in Florida, because of the FHA monthly mortgage insurance premium changes that have occurred.
Over the years, I always hear different stories on how payments were never disclosed, or had changed, how some documents weren't presented until later on, etc, etc. Even with the new good faith estimate laws that have gone into affect January 1st, 2010 and because of the Mortgage Disclosure Improvement Act (MDIA) act that took place last summer, there are still many issues out there. Brian Block even wrote this excellent post the other day about what realtors should be disclosing. Please read : - It's Material! Disclosure in Virginia Real Estate -
As it stands, people just need to be more aware and not just take someones word when they say, "just trust me". Onto some red flags.......
1. Improper disclosure of the monthly mortgage payment - This has to be my number 1 red flag in the 17 years of being in the mortgage business. It's bad enough when I question a borrower about their mortgage payment and they say they aren't sure what the other loan officer told them. Common sense people, stop focusing on the interest rate. Make sure you get that payment in writing, and most importantly, showing the breakdown of that mortgage payment.
What I have seen some loan officers do in the past is either low ball the property taxes and or the homeowners insurance. Especially after the borrower told them what the proper information was at the time of application. I hate to sound negative, but there are some slimy loan officers out there. It's usually not a mistake. They know what they are doing. I had a potential client in Jacksonville, Florida a year ago to where the loan officer had split her homeowners insurance in half. She even sent him her insurance policy. This turned out to be a significant change in her monthly mortgage payment and she then could not afford this. Yes, this kind of stuff would usually be caught down the road, but how far down the road. Did you actually get a good mortgage deal after all said and done? Was the lower payment to throw you off the interest rate or the mortgage fees? Overall, it might be to late to change mortgage companies now.
Solution : Pay very close to your mortgage payment when quoted and most of all, review your property taxes and your homeowners insurance and match it up with what you were given by that loan officer.
2. Non-costs disclosures - You won't see loan officers giving you good faith estimates upfront now, because of the new changes, but they should be giving you some sort of cost sheet. Usually this would be called the 'Itemized Fee Worksheet'. This is usually the same as the old good faith estimates. The problem with these forms, you are not required to sign them directly.
Solution : Make sure that you always ask for some sort of cost sheet, showing you the complete breakdown of your financing costs, the down payment, and the total monies needed for that specific transaction. The reason being is that the new good faith estimates don't show the complete breakdown.
3. FHA upfront mortgage insurance and or FHA monthly mortgage insurance - With recent changes to the upfront mortgage insurance and soon to be changes regarding the FHA monthly mortgage insurance, I have seen some loan officers disclose the wrong percentages. Yes, this will usually be caught sometime during the process, but it could change your figures which could pinch your wallet.
Solution : Just be very careful in who you choose as your loan officer. It doesn't matter if it's a friend, a friend of the family, a referral from a realtor, or even the internet.... Get to know who are dealing with. Please read : Don't be afraid to interview your loan officer or realtor.
Summary : Overall, you just need to be careful, but not overly careful, to the point that you just have a hard time trusting someone. Just be careful of those that seem to keep making promises, making guarantees, etc, etc. These are usually false security terms and you could oversee the important facts and issues. Many realtors and loan officers can be trusted. As a buyer. you want to be working with a buyers agent. My advice is to be careful on those that also represent the seller. This is called dual agency.
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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!
For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors
Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc
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