 |
 |
Top Mistakes Made By Borrowers that Can Be Easily Avoided
 E-mail Friend
 Printer Friendly
If mortgage hunting were easy this article would never be published. Simple enough? Hopefully. Summarized: If you are a red blooded American mortgage shopper, you will make (or may have already made) some mistakes in the big scheme of things. Its no surprise when you consider there are a myriad of numeric figures along with overwhelming amounts of documents involved in home mortgage procedures. Mix in a few shady mortgage brokers and perhaps a jacked-up rate and, voila, you wind up paying more and sleeping less for the next 30 years.
Today's article is to aid you in sidestepping some of the more common mistakes.
First, let me talk about throwing your fishing line into the water. Swing very wide and hit as many spots in the pond as you can in as short a time frame as possible. Translated: Get on the ball to seek out a trustworthy and capable lender who offers the lowest mortgage rate. Another way to say it is: Sling enough mud against the wall and something will stick to it.
You have to shop with as many variant types of lending pros as you can quickly. If you throw your line in the water in a big enough pond, you will be more likely to catch something than if casting into a swimming pool, agreed? Now relate that statement to the mortgage industry. The point is that if you search hard enough and are diligent in communicating your needs authoritatively to as many lending firms as possible you will have much greater success locating a mortgage outfit who will do the best deal possible.
Start by using the tool Al Gore gave you (the internet). We recommend searching online mortgage company lists made visible through search engines as well as companies you see in aggressive media campaigns (Ditech, Greenlight, Lending Tree, etc). Get a scope of what rates are posted in this medium to get the most of your time invested in this by working smart, not hard, in the beginning of it all.
After the web work is done, and you've submitted a few aggregate mortgage quote requests around the web in order to get a measuring stick on the market, consider paradigm shifting to the analog world. Pull out that good old fashioned yellow pages and start talking to some local pros. This will give you a more balanced feel for the overall offering of the marketplace. A wide scope is best, so keep shopping, all the while collecting tidbits of data.
Beware. You are bound to come across more than one mortgage professional who is anything but that... Professional. Rather, you will find a handful empty promises, schmoozes and perhaps even an eraser trick or two in your quest. This non-professional in the finance industry will attempt to make a package gleam for you while you are observing it through the window, but after clawing your way through the crowd and finally getting to a place where you can buy the shiny trinket you find it has taken on a rather dull, lackluster look. Many weary borrowers stay in that lackluster store and wind up buying a bill of hogwash because the effort necessary to head back out the door and into the unknown again is a bit too overwhelming. News flash... There are a number of mortgage brokers who get up every morning and come to work because they can bank on a good percentage of weary borrowers "giving up" (or giving in, actually) to that old bait and switch. The most important thing to bear in mind is that until you lock rate and fee schedule a broker can swing numbers up and down as He/She pleases (within certain boundaries). It is only after locking mortgage rate that you are officially in agreement with the lender, thus guaranteeing the numbers will not deviate. Be meticulous in the details early-on and never take your eye off of the ball.
Time is money, like it or not:
The mortgage rate market is volatile, to say the least. Because of this, prices you are quoted today could be quite different than those quoted tomorrow. Henceforth you will need to cram to get as much data from as many brokers as possible within a 24-48 hour period. Yes, take a day off from work... You will need it. One can not compare an apple to an orange, and that is what you may be attempting to do by grinding prices between several brokers that you queried on different days, or even differing weeks. It will also give the mortgage broker the impression you don't know what's really going-on, and that is never a good spot to be in when someone else is holding your wallet.
Don't keep the important details in your pocket:
As with any buying process, it is never wise to give up 100 percent of your information so easily that it may possibly be used as a weapon against you later. However, in the mortgage rate acquisition game it is a worse choice to withhold facts. Why? Because through the whole process interest rates, prices and other variables are swayed by seemingly countless criteria. Some predominant factors are borrower's credit rating (or FICO/Beacon score), type of real property being financed, characteristics of the transaction and more. These are but a few of many variables a lending company tosses-around in a whirlwind to make an assessment of their overall risk vs. reward in lending to you. Other factors weighed-in are the amount of the intended loan, your historic and current dealings with revolving credit grantors, condition and classification of the property being mortgaged and how you intend on documenting income & net worth.
So, unless led to believe otherwise, a mortgage pro whom you request a rate quote assumes a boilerplate list of specifications which generates the lowest price available for an average client. If specifics on your loan differ from the standard client (in an adverse manner) prices will float higher upon revelation of these facts.
An example: Your lending professional makes an assumption that you will be financing or refinancing a single-family primary residential property. Later, as it turns out, He/She finds that you have been vague in communicating important details. As it turns out, you wish to get financing for a multi-family property with the intent of realizing income from the rental of such. Guess what? The rate will increase without a doubt. The punch line is that the broker can't be blamed. He/She didn't flim-flam, rather you, yourself actually drove the price upward on your own by not sharing the finer details with He/She from jump street. There's nothing worse than disappointment when making decisions about the largest single purchase of your lifetime. This is big money, folks. Letting the proverbial cat out of the bag is a good thing.
Don't rely on a mortgage broker's word too much:
I do not mean this as a stereotype of mortgage brokers in general in any way shape or form. Many of my most esteemed colleagues and relatives are in brokerages, and I'd trust any of them alone with my wife any day. But there's always someone out there who spikes the punch for the rest of the good guys. That said, the true fact of the matter happens to be that I am told time-and-time again by those seeking advice from me that at some point a mortgage broker has verbally assured the borrower their rate has been locked when, in-fact, no lock exists... yet.
The reason for this smoke-and-mirrors parlor trick is simple: If mortgage rates don't rise between the "supposed" lock rate date and the closing date, the mortgage broker stands to line His/Her pocketbook with more of your cash. In the rare occasion that rates spike during this supposed lock period (not common, but nonetheless it happens) you're left holding the short end of the financial stick. Yes, I know...
..."Profit"... It sometimes shows the uglier side of itself in any given industry. Its a shame some unethical mortgage brokers ruin it for all the good guys. My point is that you should verify the lock in writing. Be in control of this sale at all times. That means you must never, be frightened, overwhelmed or intimidated to such point where you refrain from getting written clarification of each transaction in such a huge dollar game. You would not ever leave a store without your receipt after dropping $200,000 would you? ...I rest my case.
Assuming makes an a!$ out of...
I don't know about you, but when I am in a restaurant I never assume that their steaks are impeccable just because just because the seafood salad is great. Exercise this intuitiveness in the mortgage game. It is foolhardy to make assumption that a mortgage pro offering great rates for one particular loan type will, by default, offer an equally appealing rate for a whole other type of home loan.
Most borrowers do a "cat dance" of sorts in the whole process. Meaning, a person can be fickle throughout the process of obtaining a mortgage with regard to what exactly they "want."
People change their minds. That's in out our nature. Many times an individual's mind will change radically in the earlier part of the whole process. For example: A person starts campaigning to obtain a fixed rate mortgage. Then at a later time, he or she decides to go with an adjustable rate mortgage (ARM). Everything changes.
Another for-instance: A person intent on utilizing a 30-year mortgage program later decides to switch to 15-years. What about those times when a borrower initially desires zero points, but later opts for 3 discount points to push the rate lower. Yadda... Yadda... Yadda... You get the point. Creating a cataclysm by being indecisive, and then expecting consistency on the other end is not only dim, it is hypocritical.
Understand that for each change you make the other end must react to that movement. Kind of like a Doppler type ripple. Many times the reaction on the mortgage company's part winds up bearing significantly less favorable rates. Unneeded swings in the flow of the loan process can prove be catastrophic emotionally to the borrower. A dramatic move like the aforementioned can overshadow the efforts put forth by the borrower. The bottom line is that just because a lender has the best rate for one type of loan doesn't mean He/She doesn't have a completely junk rate for another program.
Hopefully this article will aid those on the road searching for an ideal mortgage in avoiding a few chuck holes.
Article by Stockton Marquette
Economic Analyst and Mortgage Industry Advisor/Forecaster
|
 |
|
|
|
|
