Smart and Simple Financial Strategies for Busy People by Jane Bryant Quinn

Author:Jane Bryant Quinn [Quinn, Jane Bryant]
Language: eng
Format: epub
Tags: Business & Finance, Finance & Investing, Finance, Personal Finance
ISBN: 9780743269957
Google: -yH0iXDQfIYC
Amazon: 0743269950
Publisher: Simon & Schuster
Published: 2006-01-01T06:00:00+00:00

How to Find a Good Mortgage

Start with the Web. Check rates at the three sites I mentioned. Ignore their “Wow!” offers for interest-only ARMs and Option ARMs (the loans that let the banks rake in extra interest while you pay, pay, pay). Instead, scope out their plain-vanilla ARMs and fixed-rate loans. Rates and fees are often the best you’ll find anywhere. The more questions the lender asks you, the more accurate the rate quote is likely to be. There’s no problem borrowing by Web. E-lenders are fully equipped to handle their side of the paperwork, by phone, e-mail, and local agents. That is, if your credit is good. If it’s poor, you’ll need special underwriting.

Ask your bank. You might prefer the experience of talking with someone locally. But go this route only if you get the same low interest rate and fees you find online. After an opening conversation with your friendly banker Bob, you’ll deal by phone and e-mail anyway. Once the loan closes, the bank will probably sell it to an investor somewhere else in the U.S. (or the world), so you get no particular advantage from borrowing in your hometown.

Ask a mortgage broker. Mortgage brokers know all the lenders and the offers. Their job is to shop the market and find you a suitable loan at the lowest possible rate. They can be especially helpful if you’re a first-time buyer, need an FHA or VA loan, have problem credit, can’t document your income, or need other special services. Unfortunately, not all mortgage brokers play fair. Some of them overcharge, in ways you don’t suspect.

Getting a loan through a mortgage broker should cost exactly the same as if you went to the lender yourself. But some of them overcharge in ways you don’t suspect. For example, they might: (1) Steer you into a higher-rate loan because it pays them a higher commission, all the time telling you that it’s the best you can get. (2) Quote you an extra-low rate (even lower than you found on the Web) to get your business, then tell you (falsely) “the market has changed” and deliver a higher rate. (3) Say they’re charging you “one point” (1 percent of the loan) without disclosing that the lender pays them a second point, which is included in your mortgage rate. (4) Claim “our services are free,” then put you into a high-rate loan that pays them an extra-high commission. No services are free.

To be sure you’re dealing with an honest broker, start by negotiating a fee. Then ask to see—actually see—the sheet that shows the wholesale interest rate and points the lender charges. The sheet might say “6 + 1,” meaning 6 percent plus one point. You should pay that amount plus the broker’s fee, no more. The broker should put the fee in writing and agree not to add a percentage to any third-party charge, such as the appraisal.

Consider doing business with one of the people who call themselves an Upfront Mortgage Broker.

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