Rate quotes Fact or fiction

Loans differ from most products. You won't know the price (total costs) of your newly originated mortgage until after you have agreed to buy it. This industry-wide practice encourages some loan reps to charge you more than you were originally told; but it also exposes you to risks when you deal with honest reps.

Even though you negotiate interest rates, costs, and fees with your loan rep at or around the time you apply for your loan, the rate you pay can still differ from the rate you both have agreed upon. Moreover, if market rates fall prior to your closing date, you could lose that rate drop—unless you protect yourself as Mortgage Secrets advises you to do.

Lowball Quotes

Lenders compete aggressively with each other. To draw in prospective customers, some loan reps deceptively lowball interest rates, points, or closing costs. Or if true, the quoted figures may apply to only a small niche of people. After you're a week or two forward in the mortgage process, the loan rep informs you about a previously overlooked glitch in your credit, employment, tax returns, or qualifying ratios. Often, a loan rep who wants to change deal terms can find a way to do so.

Bait and Switch

Once you learn that your loan won't go through as previously agreed, you could threaten to switch lenders. But, if you're obliged to the sellers for a 30-day close and you've already hit day 13, what do you do? If the loan rep talks a good story, you'll agree to switch to a less desirable loan product, or perhaps accept a higher interest rate or costs. Either way, a dishonest loan rep can use this sleight of hand to increase his (her) commission. If he's smooth, you will thank the rep for the heroic job he performed to save the deal and meet your closing deadline.

Your Defense

Don't shop price alone. Shop for integrity. Verify the experience, reputation, and dependability of the loan rep. Check references, of course, but more importantly, early on nail down the precise loan amount, costs, interest rate, and terms the loan rep is promising and why he thinks he can deliver on his promises. Listen carefully for hedging. You know the "Well, I'll try to do the best I can." Watch for mannerisms, eye movement, body language. Does the rep pass the comfort test, or does something not feel right?

When thinking over the times I've been sandbagged, one constant remains: The clues were lying in plain sight if only I had paid attention. Isn't that fact true for you, too? When asked, all honest loan reps will provide you written guarantees subject only to disclosed and explained potential changes. Seek not only a true good faith estimate (GFE), but also any possible reasons the final loan amount, costs, or terms might differ from that GFE.

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