HSH's Ten Best Ways to Improve Your Mortgage Experience
Tips for a better refinance or purchase transaction
1. If the mortgage retailer you're interested in is unfamiliar to you, take the time to check them out. Check with the state banking department where your loan will be originated (and the state the retailer is headquartered in, if it's different). Call a local Better Business Bureau. See if they're members of local, state or national trade groups or associations. You can also check out their entry in the Nationwide Mortgage Licensing System.
2. If it sounds too good to be true, it probably is. Be wary of deals which are way below the other offerings in your market, or promises of service quality which can't possibly be met ("we close in 24 hours!") Don't be surprised if the advertised deals don't apply to your situation; they may be available only to the absolute best, top-shelf borrowers. The law only requires that the deal listed be available -- not that it's available to you.
3. Research, research, research. It's your job to know what is normal for your loan circumstance. Call lots of outlets. Get rates, points, fees and commitment periods for offers that are as similar as possible. Some of the lowest rates offered have no lock-in available, or can be obtained only if you close ASAP, so make sure that the quotes you get have the same terms, if possible. That way, you'll soon be able to judge a good, bad or just average deal.
4. Ask questions, get answers. People in the business will sometimes talk a blue streak and expect that you understand. If you don't get it, say so. Make them explain -- to your satisfaction -- or take your business to someone who will.
5. Get it in writing, on company letterhead, and signed. This pertains to everything you negotiate in your deal, but especially any lock-in agreement (or execution) you conduct. More misunderstandings and disputes are related to lock-ins than any other item. Under the law, verbal agreements aren't worth the paper they're not printed on.
6. Sign nothing you don't understand -- and understand everything you sign, even if you need to get outside help to do so. If legalese or contract language is difficult for you, hire a lawyer to help manage your transaction. The few hundred dollars can be very inexpensive insurance.
7. Ask how much experience they have in dealing with mortgage situations similar to yours. How long has the company been in business? How long has your salesman/broker and loan processor been in the business? More experience can mean a smoother transaction, especially if the market gets rough -- and it can help to know your loan processor.
8. If you're coming in "blind", with no referrals from friends or relatives, ask for a few references you can contact -- and follow up on them. Of course, they'll probably be the most satisfied clients the firm has worked for, but it is a place to start.
9. Make sure your "no points" loan is really "no points." You might not know that there are actually two kinds of points: Discount Points (which lower the interest rate) and percentage-based Origination Fees which cover some of the cost of getting you the mortgage, including commissions. A true no-points loan has neither -- and if your "no points" loan has a one-percent Origination Fee, it's actually a one-point loan. Compare it against other one-point loans for accuracy.
10. Ask about "Prepayment Penalties" or "Early Termination Fees." Some of the lowest rates in the market, especially for ARMs, are available only on loans which carry hefty fees if the loan is refinanced in the early (the first three to five) years. If you don't ask whether any apply to your loan, you could find a costly 'zinger' down the road.
A few other suggestions for a better mortgage experience:
Decide what kind of mortgage shopper you are before you sign up. If you prefer a retail experience like Macy's, with lots of in-your-face customer service, you might be put off by the arms-length website and 800-number-callcenter-for-customer-service commonplace among Internet retailers. If personal contact is important for your comfort, you'll probably want to work with live (local) humans.
While you're at it, you'll want to have an idea which is more important to you: price or service. Big national firms with beautiful offices may offer terrific service, but someone has to pay for it. Conversely, a low-overhead operation might offer great prices, but may lack enough support people to address your needs in the manner you prefer. Price and service aren't necessarily mutually exclusive, but finding both at the same place might be tougher than you'll expect.
It's also a great idea to review as many required mortgage documents and disclosures as you can before you apply, including a standard mortgage application (sometimes known as a Fannie 1003). Being familiar with them -- and what goes into filling out your mortgage application -- will make them (hopefully) less confusing and help you feel more comfortable when signing them.
If you should find a need to complain, know how to go about it. There are any number of regulators and consumer watchdogs safeguarding the mortgage and housing industry, and knowing how to complain and who to complain to about your mortgage or real estate transaction can be a key to resolving problems and disputes.
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