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"How To Spot Mortgage Tricks"

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“There is hardly anything in the world that some man can’t make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey.” -John Ruskin

Article: "How To Spot Mortgage Tricks"
By Andre Plessis

"How To Protect Yourself Against Mortgage Brokers Tricks"

A major problem in seeking a mortgage is that loan providers know far more than mortgage seekers. So it is imperative that mortgage shoppers need to know how to protect themselves. Here are some of the tricks used by mortgage brokers, loan officers, bankers and lenders, followed by the advice to protect yourself.

Teaser Rate: To attract customers, some brokers and lenders will advertise low prices also called teaser rate that they have no intention of honoring. Once they get you in the door, they will play bait and switch. Bait and switch is the game played by some businesses who advertise a low price but when you arrive at the store they cannot offer the advertised price, the price is no longer available, they are out of the product, or you cannot qualify so they try to interest you in another product.

Your Protection: Don't respond to any ad that quotes a price 1/2 point or more below the lowest price offered by anyone else, or those who advertise "NO COST, NO POINT, NO CLOSING COST, NO FEES". How would these people get paid if they do not charge??? 95% of Brokers are sales people who are getting paid on commission ONLY, so they need to get paid. This is a very lucrative industry where brokers make THOUSANDS OF DOLLARS per loan, so trust me YOU WILL BE CHARGE one way or another. I advise anyone not to respond to these ads that promise the world, that tell you they have the lowest rates in the nation. All mortgage companies have access to the same lenders. These ads that just talk about rates are nonsense. Mortgage is not just about a rate. There are many things to consider besides the rate.

Surprise and Unknown Fees: Some mortgage brokers and lenders will deliberately not mention certain fees associated with the loan. They are never mentioned by the broker, until the borrower is far in the mortgage process and it will difficult for the borrower to back out from the deal. Remember that you have submitted all documents, made and signed copies of W2 forms, pay stubs, bank accounts and others, paid for an appraisal so backing out from the deal will be tough and these sales people know it as they are experienced.

Your Protection: Require the broker or lender to provide a good faith estimate and a written list of all fees you will incurred, including known payments to third parties such as credit reports and appraisal fees. It should not include prepaid items, payments by the lender to the mortgage broker, or charges by third parties unconnected to the lender which are not accurately known until later.

Locking The Rate: Some mortgage brokers will not lock the rate and if interest rates go down the broker will get paid a higher commission, as the rate they sell you will be higher than the PAR rate. They will collect a YIELD SPREAD PREMIUM (YSP) on the back, which is a bonus paid by lenders when brokers charge more than the PAR rate. If the rate becomes higher than the one they quoted you at the beginning, they will simply tell you that the rate went up and they will just hope that you accept their explanations. I was told one day by a borrower that the mortgage broker told him that because he was not a U.S citizen the rate had gone up. That was a B.S excuse as U.S citizenship is not a factor used by lenders to determine the interest rate.

Your Protection: Insist on seeing the loan commitment letter (the rate lock) from the lender who has supposedly locked your rate. You should not deal with a mortgage broker who won't agree to show you the commitment letter. Make sure the rate is locked for a 30-day period, which will give you enough time to close the loan.

No Closing Cost Loans: Loans with high rates for which lenders will pay brokers a "YIELD SPREAD PREMIUM" (YSP) are sometimes advertised as "No-Cost" loans, "No Closing Costs" or No Point, No Fees", which they are not.

Your Protection: Check the APR (Annual Percentage Rate) shown on the Truth in Lending Statement (TIL). On a true "No-Cost Loan, the APR should be the same as the interest rate. Example: If rate is 6.5% then APR is 6.5%. The Truth in Lending will show you the APR. So if the rate and APR are different, that means that you are not getting a "No Cost Loan".

The following fees ARE generally included in the APR:

	Points - both discount points and origination points
	Pre-paid interest. The interest paid from the date the loan closes to the end of the month. Most mortgage companies assume 15 days of interest in their calculations. However, companies may use any number between 1 and 30!
	Loan-processing fee
	Underwriting fee
	Document-preparation fee
	Private mortgage-insurance

The following fees are SOMETIMES included in the APR:

	Loan-application fee
	Credit life insurance (insurance that pays off the mortgage in the event of a borrowers death)

The following fees are normally NOT included in the APR:

	Title or abstract fee
	Escrow fee
	Attorney fee
	Notary fee
	Document preparation (charged by the closing agent)
	Home-inspection fees
	Recording fee
	Transfer taxes
	Credit report
	Appraisal fee

If the APR is significantly higher than the rate quoted, it is because there are substantial fees to compensate the broker.

If I were to shop mortgage brokers, I would ask the following 24 key questions (A MUST READ). These questions will help you feel comfortable that you are making the best decisions.

Hope this help!!!!

Andre Plessis

Andre Plessis
"The Mortgage Guru"
"A Mortgage Professional whose primary goal is to provide the expertise, guidance and skills necessary to obtain the best mortgage to meet your personal needs".
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P.S. If you are at all intimidated or unsure about the mortgage process if you don’t understand how to evaluate your options in getting a mortgage loan our 24 key questions will help you feel comfortable that you are making the best decisions. Also if you are in the process of refinancing your home with anyone, CALL ME and I will let you know if you are being offered the best loan option based on market conditions and your financial situation.

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