One day, you’re interested in getting a loan. Your plan is simple: Call a number of lenders and see who has the lowest rate. You call the first lender. She or he asks you when you plan on getting your loan. You tell the lender, “in a couple of months”. The lender gives you a low rate quote. And, after a number of calls, you find the first lender you called has the lowest rate. When the time comes, you know whom you’ll use.
Now fast forward a few months. You call the first lender. The rate is a bit higher than the last time you spoke with this lender. The lender tells you that the rates have gone up a bit. He or she even invites you to check around. Why do that? After all, this lender had the lowest rate quote when you did your first rate search. You get your loan and all is well, right?
Wrong! This lender used a trick that has become a dark part of the mortgage business. You see, the first lender you called knew you wouldn’t be getting your loan for a couple of months, so the lender quoted you a rate well below what is feasibly available to you. After you checked around, you discovered this lender’s quote was the best. Surprise! You KNOW this lender has the “lowest” rates because it was the “lowest” rate quote the last time you called. This technique is actually taught by unscrupulous trainers and is shameful!
Here’s another trick:
You call a lender, get a rate quote, even meet with him or her and complete a loan application with the rate that was quoted shown in your package. Time goes by, your loan process continues and you are now ready to sign loan documents. When you get to escrow, pen in hand, you discover your excellent rate is much higher than you were led to believe. The explanation: Your program got a little more expensive, the rates went up, or whatever. If you want the rate you were quoted, you will have to pay a couple of more discount points to get it. For those of you who do not know, one discount point equals 1 percent of the loan amount. Nice, eh?
There are so many scams a dishonest lender can pull on you; it would take a book to discuss them all! You definitely can be a sitting duck for a lender who has his or her technique down. But what do you do to protect yourself?
Easy! Don’t just jump at the lowest rate quoted to you. Heck, anyone can quote a low rate! But if it’s not possible, what good is the quote? More important than the rate, you need to know whom you are dealing with. Investigate the lender before using them. Get referrals from friends and relatives based on their actual use of the lender, not based on what they heard or the lender’s polished ads.
Another great source (and my favorite, of course!) is your real estate agent. That is, if your agent is someone you can truly trust. Agents regularly work with lenders and these lenders know that if they don’t perform, they had better never set foot in that agent’s parking lot again, never mind their office. But make sure your agent actually has first-hand knowledge of the lender. Has the agent worked with the lender? How is the lender with clients? Is the lender honest and truthful – even if it’s bad news? How timely is the lender? How are the lender’s costs? These are important things to know.
Also, be open to someone being honest with you. Don’t go searching for the answer that makes you feel good. Sometimes, honesty hurts! If you look for that “good” answer, a less-than-honest lender will sense it and they’ve hooked you!
Remember, your real estate agent is not only working for your business, but also for your family’s business, your friend’s business, everything. Your agent would definitely want to ensure you work with quality people who will take care of you as well as she or he would.
Lawrence D. Elliott, a nationally published author and an active California RealtorÂ® since 1989