Six Realities Your Loan Officer May Be Keeping From You

Despite the fact that loans are challenging to get these days, picking a new home may be the easiest part of home buying. Finding the best mortgage rate is many times where the confusion begins. The majority of borrowers don't have a clue what all of the terms in their mortgage documents mean. This is a problem because there is nothing worse than a bad mortgage (disguised as a good one). If you purchase funds the wrong way, it will give you years of grief which could even lead you to financial disaster. What should you be aware of when you engage a slick loan officer?

Fist of all, you should understand that the fees listed on the GFE (the Good Faith Estimate) are negotiable. Those fees are not written in stone. Any time you are working with a broker, the processing charge can be negotiated. Depending on the type of loan that you are obtaining, the mortgage broker can make up some money on the YSP (or the Yield Spread). This is the fee that your broker is paid from the loan wholesaler or bank that is funding the loan.

Secondly, always find out what the yield spread is. Banks compete with each other to get your loan broker's business. Different banks provide different yield spreads to loan officers depending on how proactive they are about getting more clients (and how profitable the rates are which they are quoting you). Because you are the one who pays for this, ask how much it is upfront.

Third, with good credit you should not be paying loan origination points or loan discount points. A broker who charges you this is probably pocketing the extra cash at your expense. If your FICO credit scores average 620 or better, and your broker won't refuses to budge on these points, start looking for a different loan officer. Unfortunately, if you have low credit scores, these discount points or loan origination fees may be non-negotiable.

Fourth, title insurance and title fees can also be negotiable. Though your loan officer might not have control over this, he will often "prefer" one company over another. Do some comparitive shopping. Get a hold of some title companies to determine what they are charging. If you're refinancing your house, you should definitely be able to receive lower rates on title insurance and escrow fees.

Fifth, when you contrast rate quotes from various lenders by comparing the APR (the Annual Percentage Rate), you'll surely end up confused. Many brokers who fill out the Truth in Lending (TIL) form don't enter in all the fees, and the result is that the APR comes out lower than it actually is. A discouraging eight out of ten TIL disclosures are not filled out correctly.

Sixth, you should not have to pay any fees up front to begin a mortgage. Some brokers charge an "application fee" which they state is used to cover the cost of the property's appraisal. Because they say this application fee non refundable, the majority of buyers are not as likely to search for better offers. Because the broker knows that you probably not going to do comparison shopping on them, they will charge you a higher rate. Therefore, don't work with a broker who demands this fee.

In conclusion, you will want to compare loan brokers so that you don't find yourself stuck with a broker who is taking advantage of you.

John Souter lives in paradise. His company provides Maui weddings in Hawaii. When he isn't busy planning Maui weddings, he is an active real estate investor. John is an alumni of Nouveau Riche University. For more information on real estate investing, take a look at his website at: nrusuccess.com..