Selecting a Good Lender

Beware of unscrupulous lenders. The market place has plenty of them, and they are a lot hungrier this year with refinances down. Don’t let them eat your lunch!

In the great refinancing boom of 2003/2004, brokers and lenders did not have to work very hard to make money. Mainly, they had to answer their phones and explain to eager borrowers why they had to wait a few weeks for a home appraisal.

Even though rates have barely moved up, refinancing has slowed considerably, and with home prices moving up, it sometimes takes creative — and more labor intensive — financing to get potential buyers qualified for the larger mortgages they need to get into houses.

It all points to a harder life and reduced income for mortgage brokers. Some of the less ethical ones are softening the blow by padding their fees, steering clients to more expensive mortgages and taking advantage of unwary consumers.

"They were order takers," says Robert Pessemier, of Money Metrics, an Issaquah, Washington, financial advisory firm which analyzes mortgages for clients. "Now they have to work harder and they are trying to get more out of each deal they find."

Some of the tricks of the trade, according to Pessemier, involve building fake fees into closing documents, not providing those documents in a timely and clear manner, and having a wink-wink deal with the lender in which the rate is quoted higher than the lender actually offers, so the broker can pocket the difference.

Some companies resort to underhanded methods in order to get business, or to pull business away from competitors, writes mortgage broker Tanya Higgs in a report on "the tricks loan officers use to get your business ... and take your money."

In the Richfield marketplace, you can protect yourself somewhat from bad lenders simply by comparison shopping – if you know the right questions to ask. Title companies and real estate agents can also make recommendations on good lenders. They see plenty of bad lending practices going on, especially the old ‘bait and switch’ tactic. In ‘bait and switch’ a lender assures you that you can not only obtain a loan, but at a very good interest rate and with little or no down. After you have made an offer on the home of your dreams and the loan processing has begun, the lender discloses that yes, you are approved, but not at the interest rate and down payment he/she quoted you early on. (bait you in, then switch loans because you cannot qualify for what the lender quoted you)

The old adage, cif it seems to good to be true, it probably isn’t true," holds all to well to loan practices. Take time to ask questions, always get a ‘good faith estimate’ in writing, and always get an APR rate from each lender that you interview.

Questions, call us, we’ll be happy to help you.

For more information, contact:
Hal or Jean Ward
Coldwell Banker Preferred Properties
Richfield, Utah
435-896-5887