I’ll bet you a Bacon Date Blue Cheese Scone and a Counter Culture Coffee at Northside Social that 8 out of every 10 Mortgage Lenders who have been in the business for more than 72 hours will tell you the following situation has occurred to them while speaking with a prospective client. The wording may differ, but the concept remains. This is how it goes. And, I promise, not every sentence will be as longwinded as the first one up there. WARNING, this is a bit cheesy, but I don’t care. Client: I really have a good feeling about you. My buddy highly recommended you, I believe you are honest and trustworthy, and I just like you. Lender: Great! I’m happy to be of service. Client: But…you quoted me at a rate of 4.3% on a 30 year fix with 7% down on a $325,000 home. Lender: This is true. Why the ‘but’? Client: Well, I just spoke with “Big Bank Mortgage” and they quoted me at a rate of 3.8% for the same exact mortgage. Lender: Okay, so they included a GFE, a Good Faith Estimate? Client: Well, no, but the guy on the phone told me he had an itemized list of all the closing costs and all that. Lender: Was there any mention of having to pay points to get that kind of rate? Client: Points? What are those? Lender: A point is 1% of the loan amount and is used to “buy down” the interest rate. See, what “Big Bank Mortgage” isn’t telling you is that you’ll probably have to pay $6,045 (2 points, 2% of $302,250*) at closing to get that rate. Also, if you didn’t receive a GFE, you were not quoted. Itemization is not a GFE. No GFE, no quote. *$302,250 was found by multiplying $325,000 by .07%, the down payment. Client: I see. Well, that changes things. Thanks for the eye opener. My grandfather always used to tell me to believe nothing I heard and half of what I saw. Nowadays, with the invention of Photoshop, you can bump up that 50% to 100% of what you see. The moral of the story is this; challenge what you see and what you hear. Ask questions about a GFE, demand to receive a GFE if someone is trying to give you a quote, and don’t get deceived by a golden tongue. Vocabulary A Point: 1% of a loan amount and is paid by the borrower to decrease the interest rate. GFE: Good Faith Estimate. Estimate of all charges and fees associated with the mortgage loan. Includes the settlement costs/closing costs, title insurance, inspections, taxes and other charges. It is required to be disclosed to the applicant within 3 days of application by the Real Estate Settlement Procedures Act (RESPA).
Posted on: Mon, 22 Jul 2013 19:32:37 +0000
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