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Consumers looking for any type of financing are first and foremost, borrowers and are subservient to all lender approval requirements.
Borrowers must realize that lenders are subservient to choice.
The borrower always controls the choice of who will originate, funds and closes the mortgage loan. To earn a profit, lender must close the loan.
Lender choice is the key to creating lender competition.
The borrower must understand the power of the purse.
Lender selection is the key to lender profits.
One lender can fund the loan, the rest are a footnote.
Regardless of your efforts in creating competition for your loan, the appraisal process can negate all efforts to get the best loan program. Be diligent in your efforts to buy a home that will appraise at the value required by the lender. Loan to Value is a critical element in the home buying process. Appraisal less than sale's price can upset the transaction and kill the deal.
The same holds true for home owners wishing to refinance, needing a 2nd mortgage or applying for an equity line of credit. Low appraisal can kill the deal. Don't spend money for an appraisal, unless you are sure of the value and the lender's LTV requirements.
Mortgage borrowers can create lender competition for their loan by interviewing as many mortgage originators as possible.
Always start by interviewing as many Mortgage Brokers (MB) or other third party originators (TPO) as possible. "RESPA" requires a more complete MB disclosure and therefore, a sharper picture of interest rates and costs.
The MB & TPO are at a disadvantage when disclosing all charges and "COMPENSATION TO BROKER" paid by the funding lender to the MB. MB information can help the borrower find the lowest available interest rate in the local real estate lending market, along with saving money.
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Questions that need answers |
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Start with the Mortgage Brokerage community |
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1. Will you fund my loan? |
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2. Will my loan be sold to an investor after closing? |
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3. Is your main business servicing loans? |
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4. Will you receive a lender paid Rebate after closing? |
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5. Can you lock the interest rate during the loan process? |
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6. Will you guarantee loan charges at time of application? |
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7. Will the "Good Faith Estimate" (GFE) reflect cost? |
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8. Will the "Annual Percentage Rate" (APR) reflect cost? |
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9. Can you pre-qualify me over the phone? |
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10. Are you willing to compete for my mortgage loan? |
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11. Do you require an up front appraisal or processing fee? |
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12. What is the lender's maximum Loan to Value (LTV)? |
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Statement |
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I'm prepared to cancel my loan request upon learning of any false or misleading loan information at any time during the loan process. Any misrepresentations relating to my loan application will be considered a serious breach in the legal and ethical standards required by RESPA. |
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Mortgage originators have a tendency to present the "Bed of Roses" program when first discussing loan details with the potential client. During the phone pre-qualification interview, the borrower should be as clear and honest with personal information, so as to help the originating entity determine the best available program.
Be a tenacious questioner.
You might want a fixed rate, but the information you supplied during the phone interview does not meet loan underwriting guidelines.
This might not necessarily be true, but contacting additional lenders and completing as many phone pre-qualification interviews as possible, will present the borrower with many different loan options.
Be prepared to cancel the loan application at any time prior to loan closing, if you discover the interest rate, cost or loan details are not as originally disclosed.
Be mindful of profit gouging.
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