Myths Concerning Real Estate Financing
Purchasing a home for yourself or as an investment is one of the largest investments one can have in their life. Obtaining a loan which will permit you to obtain the house you are seeking, without needless delays, can be a difficult task. Below are a number of myths, misconceptions and answers about the process:
In order to obtain the best rates, shouldn’t I shop around at many different banks and lenders?
While one bank will have only a couple programs available to the consumer, a mortgage banker is a licensed professional who offers a variety of rates and mortgage terms for you, by accessing a network of lenders that includes major banks, credit unions and finance companies. Furthermore, a mortgage banker is not beholden to any certain bank or lender, hence, there are no special interests involved to use specific companies. In essence, a mortgage banker “shops” loans for you.
Additionally, loan rates can rise quickly. Many people attempt to “shop” loans for themselves with various banks and lenders. Because rates can change daily, this can defeat the purpose of “shopping rates” in the first place. A licensed mortgage banker will be an advocate in many areas, including watching the market for you, to ensure that your loan is locked at the right time, and rates do not rise during the loan process.
Shouldn’t I go with the person offering the best quoted interest rate?
The quoted rate is only one small part of the picture of a loan. Hidden fees and other costs can make the quoted rate deceptive. There are also various types of loans to choose from with advantages and drawbacks. An experienced mortgage banker shops loans for the client, and will be able to point out the pros and cons of rates and points in a loan, to serve the client’s highest needs, so that they may save as much money on interest and fees as possible.
Isn’t a mortgage banker used only if you have bad credit?
No. Because a mortgage banker has access to a large pool of wholesale banks and lenders, advantages of favorable rates and terms are for consumers with A – D credit alike.
I have a program online or with a bank where they are offering a “no fee” loan. Isn’t this the best one to go with?
There is no such thing as a “no fee” loan. Loan officers, Mortgage Bankers and banks always have a fee for arranging a loan. Such a statement usually means the fee is hidden somewhere under a different category. This tactic can be very misleading to consumers. An experienced mortgage consultant will explain costs openly to you (not try to hide them) and how they can be used to your advantage.
The loan officer at my bank seems very nice, why shouldn’t I just sign up with a loan there?
While some “loan officers” at banks are sometimes knowledgeable, they are paid to sell the limited amount of loan programs offered at that particular bank. Unfortunately, the bank “loan officer” tends to be more of a secretary role, and does not have direct contact with the underwriters who actually process the loan; hence, there tends to be a high degree of “loan fallouts” at the last minute. This can risk the client losing their home, due to financing problems at the last minute. Finally, a bank loan officers are not required to be licensed in Washington State.
Once I find a good “rate”, am I pretty safe if my loan is locked?
Unfortunately, a bank loan officer does not typically have the control of the process, has limited expertise in financing, pre-qualification issues of the client or information concerning the client. This can result in a bank program failing to fit the client or property causing the locked rate for that program to fail. An experienced mortgage banker uses their expertise to evaluate the best program for the client up front, and has direct contact with the market and the lender’s underwriters. In addition, when a rate is locked, there is a very low chance that the client would lose their fixed rate during the process.
When I go in to sign my final loan documents at closing, will my fees be the same as I was quoted by my loan officer?
We hope that would be the case. Unfortunately, it is all too common for the client to find increased fees and even higher rates at the closing table. At this point, it is too late to do anything about it, as the client could lose the house, if they do not sign the documents.
It is very important to have an experienced and ethical Mortgage Banker that is in control of the loan process, and uses their expertise and integrity to ensure that fees are the same as quoted at the beginning of the process.
This information is solely advisory, and should not be substituted for legal financial or tax advice. Any and all financial decisions and actions must be done through the advice and counsel of a qualified attorney, financial advisor, and/or CPA. We cannot be held responsible for actions you may take without proper financial, legal or tax advice.