Hazards In Selecting A Mortgage

Yes! For consumers shopping for a mortgage the home mortgage market is a virtual minefield. Let's look at some of them and the ways they can be avoided.

Market Obsolete Prices: Mortgage prices are different from one day to the next, and sometimes will even change in the same day. Unfortunately there is no way to avoid mortgages prices that have lapsed. Take for instance a newspaper ad on mortgage rates, on Monday they are reporting Friday's prices that have expired already. The best way to shop for prices is to shop on line because it will provide more current information than the private media will. Watch out, not all of the web sites provide current data. Some of the prices posted on the Internet are more outdated than those posted in the newspaper.

Market Niche Classification: Mortgage prices depend on a wide variety of borrowers, property, and transaction characteristics that it is easy to misclassify the borrower and his needs. This results in miss pricing which is common whether they are intentional or accidental. Lenders will vary the terms they offer borrowers based on what they believe will affect the risk or cost of the loan to them based on the loan, borrower, and the characteristics of the property. You will find that all lenders do not work with in the realms of every niche. The narrower the niche, the fewer the lenders.

Mortgage Price Low-Balling: Since the loan providers are working in an ever-changing market they cannot be held to price quotes. Because of this some of them deliberately quote mortgage price below those they can deliver in order to get the client in the door. Loan providers who offer phony quotes know that once you are in the application process that they have a better chance of getting you as a borrower. They can get away with this because loan providers can not be held legally to the price quote. All loan providers will warn the borrower that the price quotes aren't firm until they are locked.

Settlement Cost Low Balling: Loan providers do not always know the exact prices of services provided by third parties, so they can't be held to the figures they provide on a Good Faith Estimate of the settlement costs. Some of them will deliberately underestimate in order to get the client in the door that is shopping total settlement costs. A lender will not guarantee third party fees, the best they can do is estimate the cost for the Good Faith Estimate. To shop settlement costs a borrower's major focus should be the lender fees, because these can be pinned down. Since the shopper does not have an effective way to control lender fees and has no factual basis for challenging an item, shopper's should instead ask for the total of dollar fees at the very beginning, and should expect the lender to guarantee them through the closing of the loan.

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