Indiana Investment Watch - Investor Basic Training

We all work for the day when we can buy a home. After months, years, and in some cases, tens of years Happy Hoosier Families have saved for that day. So what happens? You figure out you need two things. One is a good real estate agent that listens and understands your needs and unless you save enough money you will also need a mortgage broker that does the same. Now with real estate you have agents and brokers and with mortgages you have brokers and lenders. While this is going to make a great post some day (but not today) you need to get some direction on what to look for.

Now I will let one of my colleagues address the real estate agent/broker thing. Let me dive into the Broker/Lender thing. Actually, since I know many of you are going out looking to buy homes and obtain a mortgage this weekend let me do the "readers digest" part for today. While everyone will tell you what they are going to accomplish not many will give you a copy of this list.

Todd Rokita, Indiana Secretary of State has posted on a this web site Top 10 Red Flags for Mortgage Brokers. Like anything it is a guide (and a pretty good one) With a mortgage it is not what you know it is what you don't know.

Many of us Hoosiers have followed similar guidelines in the past. Go to show why, for the most part, we will be OK with the Indiana Real Estate Crisis. But still you need to be very aware when shopping for a mortgage.

Top 10 Red Flag List for Mortgage Brokers

1. Shifting the closing date. The borrower's mortgage closing date can shift if the borrower does not have a written commitment from the lender. Homebuyers can find themselves in a default situation if they quit paying their existing mortgage based on an oral promise that the new loan will be closing quickly.
2. Offer a "free" refinance. Sometimes mortgage brokers will promise "free" refinances of a mortgage in the event mortgage rates drop further from the borrower's present mortgage interest rate. Every real estate closing has costs. While a mortgage broker may agree not to charge a fee, other closing costs may still arise. If such an offer is made, the borrower should get the offer signed and dated in writing.
3. Total reliance on the loan broker. The lender and the loan broker play different roles in the mortgage transaction. They are usually different, unrelated business entities. The borrower should know the lender's identity and receive a copy of the "locked loan rate commitment" from the lender in writing.
4. "Pre-approved" and "pre-qualified." These are marketing terms, not legal ones. The only legally binding mortgage loan commitment must be in writing from the lender and must contain specific terms, such as the mortgage loan dollar amount, the mortgage interest rate and the date the mortgage loan commitment expires.
5. Offer for a "free" real estate appraisal. Mortgage brokers may offer a "free" real estate appraisal under the condition that the borrower closes on a mortgage loan through their company. Borrowers should be prepared to pay for the appraisal if they decide to take their loan business elsewhere.
6. Falsified income. An unscrupulous loan broker may encourage the borrowers to falsify their income on the mortgage application. This is fraud. A buyer should never present false information. If buyers can't document their sources of income, they may be trying to purchase a property that is beyond their means.
7. Equity Stripping. This practice occurs when unscrupulous loan brokers may convince the borrower to continually refinance. All of the closing costs can be included in the total amount borrowed, resulting in the loan broker receiving a new commission and additional fees for closing each new loan.
8. Over-appraised residential real estate. This occurs when an unscrupulous loan broker, real estate appraiser and/or real estate agent collude to get a property appraised at a value grossly above its market value.
9. Undisclosed pre-payment penalties, balloon payments and rate and terms switched at closing. Loan terms are required to be disclosed early in the process. However, terms do change throughout the process. It is up to the borrower to stay on top of term changes that the borrower does not find acceptable.
10. Post-closing squeeze for more fees. The HUD-1 Settlement Statement must list all fees paid at the closing table or paid outside of closing. Anyone who calls the borrower after closing and tries to collect additional undisclosed fees is acting illegally. The borrower should also contact the Secretary of State's office to report such attempts.

Now you might just be asking why I am posting these red flags? Sure it does not look good but it happens everyday. That's why at Sagamore Home Mortgage we are the difference. Lets talk about closing cost. No one ever wants to pay them but everyone does (I really don't care about all that "no-closing" stuff you see. It is carefully worded and the no surprise mortgage is always a surprise). What I do it to put your "guaranteed closing cost" in writing. How about that for peace of mind. This business has some problems not because of what we do. It is because of what we do not do. At Sagamore Home Mortgage we get the job done right, efficiently, and quickly. If I can't put you in a better financially position I have not earned your business and will not do your mortgage.

Now as soon as tomorrow you will get a sales pitch from another Indiana or national mortgage company and you will see very much of nothing on your Good Faith Estimate. You want to see them squirm? They them that they must guarantee the closing cost and provide a rate lock.

Hey, no mortgage process is perfect. But when done the right way our process at Sagamore Home Mortgage is second to none.

It is going to be a crazy weekend. Go out and buy a house and when it comes to a mortgage give me a call. What everything going on with PMI and will work around the clock this weekend to help Hoosiers like your self.

Happy Selling (and in this case buying)!
Tony Grego - Indiana Mortgage Broker

Quote of the Day:
We need not all agree, but if we disagree, let us not be disagreeable in our disagreements.
--Martin R. DeHaan