Does It Cost To Start The Loan Process??

Real Estate Broker/Owner with McKinney Realty Group

Does it cost to start the loan process?

I had a new client ask me while we were talking about what to do next in the home buying process.  I told her “no” and that I had someone who would give her a call to get the process started.....

Well that got me thinking, we all know that can be dangerous! Anyway, the thought of getting the qualification process started is pretty simple in its self. The loan officer pulls a credit report and then get the income information, bills, etc and you are well on your way! I want to talk about those that NEVER go any farther then the credit check.....

They do not qualify at this time and will have to do some work to get things up to par so that at some point they can be a homeowner.  You may see them again you might not as a loan officer.

My question is for the clients that do have good credit and make it all the way to the closing table why are THEY being charged a credit report fee? You are already getting the loan and all that goes with that...I think that the ones that actually use the lender and go to closing should NOT have to pay that at all!

Why you ask?? Because of all the ones that DO NOT go to closing they are paying nothing for that step so why should the ones that do use the service?  

Just food for thought and something that I am going to be looking closer at going into 2011.... What are your thoughts?

Comments (5)

Jack Mossman - The Nines Team at Keller Williams in Stockton
The Nines Team At Keller Williams - Stockton, CA
The Nines Team at Keller Williams in Stockton

Melissa - The "who pays when" rules change in various parts of the country. While the content of your post does not apply to our local market and practice ... it did remind me that what seems like something "everyone should know" is not often the case.  Just presuming that a clients understands the "rules" could make for hard feelings later.  So we just need to do all the explanations a client may need ... and never presume that they already understand - no matter how many houses they may have purchased!

Have a great and prosperous new year.

Jan 01, 2011 11:42 AM
Rodney Mason
Guaranteed Rate NMLS# 2611 - Atlanta, GA
VP of Mortgage Lending - AL, FL, GA, SC, & TN

It's important to note that not every mortgage company charges borrowers for credit reports.  Those who do, they have to keep their costs in line.  Each credit report pulled costs mortgage company right then.  Depending on the size of the mortgage company, that can easy add up to tens of thousands of dollars per month

A comparison for a real estate agent might be if you had to pay MLS a fee for every home that you looked at online.  This was whether or not your buyer ever even looked at the property.  Each company has a cost of doing business.  It just varies in form.

Jan 01, 2011 12:00 PM
Tish Lloyd
BlueCoast Realty Corporation - Wilmington, NC
Broker - Wilmington NC and Surrounding Beaches

I take issue with the cost to run the credit report -- frankly it is NOT a large expense and it is important when coaching our Buyers to let them know the impact having their credit run by many different lenders can have.

I would suggest you sit down with a lender you have a track record with and get the "skinny" from him/her as to how things are done in your marketplace.  Just sayin' . . .

Jan 01, 2011 12:12 PM
Clark Cook
1st Choice Realty of Fayetteville, LLC - Fayetteville, NC
Marketing Homes For Sale In Fayetteville NC Area

I hear your concern Melissa, but the short answer is because they can! The cost of the inquiry is a legitimate expense the lender can recover. Remember , you can't get blood from a turnip! If the applicant can't qualify for a loan and the lender doesn't collect up front, how likely is it that they will pay?

Jan 01, 2011 02:49 PM
JoAnn Moore
The Mortgage Market of Delaware - Georgetown, DE
Home Loans in Delaware

Hello Melissa, You have brought up a very valid point. I am a mortgage broker and have several thousand dollars in credit report fees to pay each month. I agree with you that the people who qualify for  a loan and go to closing should not be the only ones to pay the credit report fees.

We are changing how we handle this. If someone wants to get pre qualified for a loan with our company, they will need to pay for the credit report fee, up front. In addition, if they don't qualify at that time and we give them some advice about how to improve their score, then before we run another report; we will charge another fee, up front.

Then also, if they need to have a credit supplement done to clear a condiiton, we will charge them again. We cannot continue to provide free credit reports and supplements. There is such a high percentage of people that cannot get to closing for some reason or another. Fees for credit reports are not expensive to individuals but when tallied up for a month or a year; it is a daunting figure.

Our potential borrowers will be receiving their report and the three scores for a very low cost; $23 for an individual and $40 for a joint pull; estimated. They get something of value for their fee. The so called free credit reports don't give the scores and the actual free credit report only allows you to get one agency per year.

Thank you so very much for bringing up this subject from your point of view. Our family (the company principals) were just discussing the exorbitant cost of credit reports on our expense sheet on Thursday. We will be meeting again this week and I'll be happy to report that we have a way to offset this expense. This system is fair for everyone involved.  My best to you and yours.        

Jan 02, 2011 07:24 AM