As most of you know I spent all of the 2000's directing a successful mortgage lender. Unfortunately we weren't large enough to make it over the hump and closed our doors in 2010. I was never a "loan officer" or "mortgage broker" but because I wrote prolifically about mortgages many people assumed I was. In reality I was the multi-hat wearing CEO. Much of the success of our company depended on the words that were used and almost all of those words were mine.
During that time period I "called to the carpet" several lenders and brokers on words they used. One was Countrywide for their cadance of "No one can do what Countrywide can do". I added "unless they commit fraud". Well, we know what happened to Countrywide. Another was a notable mortgage broker in the Atlanta area and I can't for the life of me remember the name of the dude or his company. He was infamous here for using the terms "no brainer" and "no closing costs". Regardless, the name doesn't matter - but the lie resounds to this day.
Let Me 'Splain
When you hear an advertisment or see and advertisement from a mortgage company, be they broker or lender, they are all basically after the same customer. My company was highly focused on real estate investors but we also offered traditional mortgages for buyers of our investor's properties. Virtually every lender offers mortgages based on Fannie, Freddie, FHA, VA, or USDA criteria. In fact mortgage regulations are so tight it's almost impossible to find a loan outside of these organizations guidelines - though some do exist. Private mortgages just don't have advertisement like these others do.
So, when you hear someone, even a banking giant like Countrywide (Rot In Peace), advertising something as though it is special all it is from there out is a game to trick you into believing you're getting something from them you cannot get anywhere else. So let's talk about traditional mortgages and 3 big lies...
Big Lie Number One: No Closing Costs
Bull springs! There are ALWAYS closing costs and the borrower ALWAYS pays them. The work around is that the closing costs are paid from the proceeds of the loan (the profit made by the lender or broker) instead of as a line item on the mortgage closing documentation. It's still there, it still gets paid, and no broker or lender is paying it without profiting it first. So I always call into question the integrity of any company that claims a "no closing cost loan". Even if you are refinancing with the same company, purchasing a home using the same company, or whatever - there are closing costs. They go to attorneys, appraisers, title agents, and other people outside of the mortgage company. Every lender or broker can do it the same way - no one has any special, magical super powers to disappear closing costs.
If you are reading this and you advertise no closing costs on a traditional mortgage and you want to prove me wrong - be my guest. Show me that I'm wrong and I will apologize and change my tune for ever.
Big Lie Number Two: Less Documentation
Not a chance. Loan for loan every GSE or mortgage insurer requires the same documents regardless of the size of the lender. Now there may be particular loan programs offered by one lender that another does not offer, but VA to VA, FHA to FHA, Fannie to Fannie, etc. comparisons all loans require the same documentation. Now as a borrower you need to know the cleaner your credit and the more compact your income and assets then as a borrower you will not need to provide as many documents yourself. But everyone signs the same documents, files the same applications, and answers the same question when all other things are equal.
Big Lie Number Three: Instant Approval
I always loved this one. Listen - NOBODY offers an instant approval unless the borrower comes in with an application completely filled, an appraisal already performed, and all of the borrower's supporting income and asset documentation in hand. Even then it's not approved until the underwriter signs off on it - even with automated underwriting someone checks the documentation manually. In reality this is always a pre-approval. Most of the time when a pre-approval is issued by one of the underwriting engines there's not going to be any trouble. But often those pre-approvals are issued with a list of conditions the borrower and the property have to meet. Appraisal is a big one and unless you are refinancing with the same lender there are very VERY few instances where an appraisal is not required.
I'm no longer in the mortgage industry though some of my clients are. When I see them making these statements you can bet I call them to account on it. If a mortgage company, be they lender or broker, will use these deceitful statements to entice you to choose them over another company then it stands to reason they will dance in the shadows on other items of importance as well. Think about this before you pick up the phone and call that company who's advertisement you saw or heard and one of these were their selling point.
Comments(3)