Mortgage : Home Loans : Refinance : Home Equity Loans

By Steve Toth

Shopping for a Mortgage these days can be like walking on a minefield and discovering too late in the process that your home re-finance or purchase will not be going to closing on time or not at all.

The mortgage industry can be a minefield for consumers who are not educated enough about the process and don’t know where not to step. Here is a partial summary of potential hazards and how not to become their victims.

1. Mortgage Industry/Market Volatility and Obsolete Prices 2. Incomplete or Misread Loan Scenarios 3. Mortgage Price and/or Interest Rate Low-Balling 4. Settlement Cost Low-Balling (before final HUD) 5. Lender Fee and/or Interest Rate Escalations 6. None Existent or Fake Rate Locks 7. Contract Bullying 8. Financial Inducement to Overcharge

1. Mortgage Industry/Market Volatility and Obsolete Prices: because mortgage prices are reset every day and sometimes in my experience three times within the same day, price comparisons from different loan providers may be invalid if not made at the same point in time. I have been a radio show host for 3.5 years and a listener has e-mailed me about the following question: “I shopped a few lenders using the telephone to contact those who looked most promising based on the rates published in the local newspaper. When I went back to the one with the best prices, however, I was told that those prices no longer valid. Is there any way I can avoid starting the process allover again?”

I’m afraid not. Most mortgage lenders/brokers change their prices daily, generally in the morning after the secondary markets opens, and sometimes they will change them during the day as well. This is a major problem for shoppers using traditional distribution channels, since prices collected from lender one on Monday and from lender two on Tuesday will not be comparable if the market has changed in the meantime. Prices advertised in newspapers are out of date when they are printed. A newspaper that publishes price information in its Monday edition, for exam!

ple, is
reporting Friday’s prices. On Monday when the paper hits the street, lenders have already posted new prices.

The Internet can ease the pain of shoppers trying to stay abreast of the market. For one thing, it provides more current information than the printed media. But not all mortgage web sites provide current data. The great majority of single-lender sites are not kept current. Multi-lender referral sites, which provide price information on hundreds or even thousands of lenders, are dependent on the lenders to keep their information up to date, which some do but many don’t. Some of the prices posted on the Internet, therefore, are even more out of date than those in the newspapers.

In most cases when consumers are shopping around based on interest rate only, it serves as a red flag to the banker or broker because only the uneducated consumer not knowing the mortgage process would result to shopping around based on interest rates only. The interest rate that a consumer will be able to secure for a mortgage will depend on their credit score, income, assets, income to debt ratio and other factors which makes it unique to the individual characteristics of the consumer. This is a very challenging concept for consumers to realize because they have been trained and bombarded by the different media advertisements to make that phone call.

2. Incomplete or Misread Loan Scenarios: because mortgage prices depend on a wide variety of consumer characteristics such as: income, credit, assets, property type, and other characteristics, misclassification and consequent miss-pricing, accidental or deliberate on the part of the banker or broker are very common in the mortgage industry especially if they have been in business less then three years.

Lenders vary the terms they offer to consumers based on loan amount, consumer

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For additional Mortgage Refinancing information
and resources visit Mortgage Refinancing.
(http://www.refinance-refinance.net)
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This entry was posted on Wednesday, September 27th, 2006 at 2:20 am and is filed under Refinance. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.