Do's & Don'ts when Financing or Re-Financing Your Home
Top 5 Do's Are:
- Check out the mortgage lender you are about to do business with. Check with your local Better Business Bureau and at ripoffreport.com on line for negative reports.
- Have the mortgage lender give you a quote to include interest rate and fees before running your credit report. As mentioned earlier, get an idea of what your credit is before talking to a lender.
- Once you make a formal application for a mortgage be sure to have the lender give you a Good Faith Estimate (GFE) within 3 business days of application.
- Once you get your GFE, have your lender disclose whether he will be receiving a “kick back” fee called a “Yield Spread Premium”, and how much of a premium that will be. Lenders are entitled to be paid for their work but YSP's are often hidden costs and can effect your rates. The second disclosure should be whether there will be a pre-pay penalty. If a lender is not willing to disclose these items, go to another lender. These disclosures should be made in writing and can be included on your GFE.
- Before closing your loan you may want to have the National Mortgage Complaint Center review and inspect the mortgage documents. You may call them at 866-714-6466.
Top 5 Don'ts are:
- Do not use any firm advertising a slick TV ad which says something like “let tons of lenders bid on your loan”. Frequently these “middlemen” get huge fees for sending borrowers to expensive lenders resulting in you paying more money. Use a reputable mortgage firm.
- Do not respond to internet mortgage solutions. If you cannot see them or check out these companies for one of the most important and expensive transactions of your life, why go that route?
- Avoid using the mortgage product offered by the home builder. Or at the very least compare or “shop” their product. In many instances Builders are also mortgage lenders who often receive huge kick backs for getting you into their product.
- Do not allow yourself to be pressured to sign or close your loan before you completely understand the transaction. Be aware that you will be under time restrictions during the loan process. The lender will “lock” in a specific rate for you, and you will have a limited number of days to complete any conditions required and to ask to review any documents. Keep track of these time lines also, as extensions can be costly.
- Avoid “no cost, no point” loans as you pay for these costs, over and over again with a higher interest rate product. Avoid loans that create a negative amortization situation. While you pay a lower interest rate now, the difference between your “Note” rate and the lower rate is tacked onto your balance.
Condensed from an article by the National Mortgage Complaint Center.