WatchWe just sat down with a mortgage guy to talk about loans etc...Now, I know nothing about the mortgage business, closing costs, points, fees etc...a mortage broker can tell me pretty much anything, I wouldn't know if it was correct or not. SO...
I would love to hire a third party that I can pay by an hourly fee to look over my paperwork when the going gets tough. Who should I hire? A real estate lawyer? What do you think?
How do most people go about this? Are you all proficient in the world of loan doc's etc...? They sure have made it complicated these days just to make sure that nobody understands what a $200 BS Fee is for...
Thanks!
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Alexandria, VA
You don't have to take a loan from that specific loan guy if you're not bounded by signed contract. So, shop arround. Contact few banks and mortgage brokers, ask them GFE, compare them.
The thing is, lot of people don't understand what those terms are all about, and they don't read fine prints. That made them difficult to see catches and traps hidden in the paper. You gotta do your own research if you don't want to be one of them. At least, try to look for the definitions and simple usage of the terms. I recommend you take your time to read mortgage section of wikipedia and about.com. It will give you some idea about what they're taking about.
Some loan guys are acting nice in front, then try to charge you something in the back. BS fees, overcharging, selling points, few oops and mistake they can't do anything about etc. When you feel like something is not right, you may want someone review it for you.
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Pick a mortgage broker or bank that you like and just read the paperwork. Better yet, ask a relative or friend who they used. It's not that complicated and it's not that difficult to read. Lock in the rate you like with them. After you lock in the clock is ticking and by the time you fool around with checking a bunch of different GFE's you are wasting time while the clock is running. If you're worried about a "$200 BS fee" you shouldn't be buying a house and your eyes will pop out if you're pay for an attorney to do something as simple as getting a mortgage and reading the easy to read paperwork. Hell, if the attorney is honest, after they are done laughing he or she will tell you that you can do it yourself. Mortgage companies have doc fees, transmittal fees/overnight fees, etc. They all have fees of some sort. Just get the best rate with the lowest points which have gone up quite a bit in the past two months or so. This is very simple stuff, just go do it.
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Here is some advice that will probably help you.
The whole points thing and other random strange fees etc... all of those are only meant to be confusing. Don't get caught up too much in the "points system", all it does is distract you. Would you listen to a car sales guy if he instead of telling you the price of the car would start playing some points game with you? You'd go to someone else thinking he is an idiot, yet this is considered a normal banking practice for some reason.
The only numbers that matter are:
- total price you are paying for the house
- total downpayment toward the principal
- total paying in all fees combined (because they tend to itemize these to make it confusing)...(these are all 100% negotiable)
- interest rate (negotiable)
Other important items are potential future fees, ability to pay down faster without fees, mortgage not being an ARM, etc... If you want to send me an email I'll help you out with advice on this stuff.
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I refi’d my mortgage in 2008. Several things I learned. Working with a Credit Union is very straighforward, fees are disclosed at time of application. Fees are low. A Mortgage Broker has the ability to rate shop multiple lenders to find the best rate for your particular situation. For this service, he charges a commission. That’s fair. He has to make a living. Working with a mortgage broker means your credit file is pulled once, used for all the lenders he checks with.
If you rate shop on your own (credit unions or local banks) and you get to the point of actually applying for a loan, you will pay application fees to each (in my case this was $25) and your credit history will be pulled multiple times. Published rates are offered only to the lowest risk borrowers. Don’t assume you will be offered that rate. You can only get the HUD-1 (the locked in rate and fee disclosure form) for an actual loan application for a specific home purchase. Anything prior to that HUD-1 is an estimate, not a guaranteed quote. Bait and switch is possible.
Once you get to the point of applying for a loan for purchase of a specific home, THIS IS VERY IMPORTANT. You are entitled by law to a copy of the HUD-1 at least 24 hours in advance of closing. But only if you ask for it. Give your lender plenty of notice that you want this. They will fuss and tell you they can’t guarantee it will be ready on time and all sorts of other BS. Tell them to schedule your closing a couple of days after they think everything will be ready. They set the date. Just make them stick to what they promise. (Also consider this when you write your offer. Allow enough time between contract and closing date.)
I asked for the whole loan package in advance and read every word (84 pages). Some pages I read multiple times. This allowed me to catch 3 errors and have them corrected, for which we rescheduled the closing. It also allowed me to ask questions about things I did not understand.
Loan related closing costs will be anywhere from 1.5% to 2.5% depending on the lender, your loan type, your FICO score and how much you are borrowing. Added to that is prorated property tax for escrow, one year paid hazard insurance and upfront PMI if you have less than 20% down. Consider self-escrow instead of bank held escrow, if you are disciplined enough. This may not be allowed if you have a small down payment. Good luck.
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Los Angeles, CA
Thank you for all your input. Very helpful.
Chris, if I have questions when the going gets tough I'll pm you. Thank you for offering!