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Ten Things Your Mortgage Lender Won't Tell You

From Smart Money Magazine, April 1995
http://www.dowjones.com/smart

1. "This isn't the right loan for you."
   
   When interest rates are rising and lenders' business is slowing down, they tend to get desperate. The result: you may be pitched a loan that is totally inappropriate for you needs.
    
2. "A slightly higher rate for you means a much bigger paycheck for me."
   
   Getting a loan with a low interest rate is not necessarily in your lender's best interest. Lenders can earn "overage" if they sell you loan with higher interest rate.
    
3. "Honor your lock rate when rates are rising? You're kidding."
   
   Even though you've locked in a rate for 60 days, don't count on getting that rate when your application is approved. Sometimes lenders hold up your application if it means you'll have to pay a higher rate.
    
4. "Our APR doesn't mean what you think it does."
   
   An APR does not compare loans on equal terms, as every lender's APR policies differ. Some include application fees, for example, and some do not. Furthermore, APRs also vary depending on the size of the loan, whether its adjustable or fixed, and on the lenders' requirements for mortgage and title insurance.
    
5. "We never met a fee we didn't like."
   
   It's bad enough being nickel-and-dimed over a checking account (one dollar for every ATM transaction, ten dollars if someone else's check bounces, etc.). With some lenders, the extra fees can go through the ceiling, often to the point of being illegal. "I've seen $150 messenger fees," says Charles Baird, a lawyer practicing in Florida. Many (fees) don't refer to any real service, but I see them on settlement papers all the time. Lenders tend to be very creative when it comes to fees."
    
6. "We're in cahoots with your real estate broker."
   
   A real estate broker who refers you to a certain lender may be getting a kick back.
    
7. "Once you buy mortgage insurance, good luck canceling it."
   
   You need to buy mortgage insurance because you can afford only 15% of your down payment, but your lender assures you it's no big deal. Once your equity grows to 20%, he says, you can bag the insurance. Good decision? Nope. Lenders make it sound easy to cancel your insurance, but when the time comes they often balk.
    
8. "You should be as concerned about our finances as you are about yours."
   
   The chances that your bank will go under are slim, but it does happen. Should your lender declare bankruptcy, you will be out a chunk of change, including what you paid to lock in a rate.
    
9. "You're prequalified? Don't bank on it."
   
   Lenders will tell you that prequalified borrowers practically have the loan in the bag, but often the preapproval is based on verbal statements without verification. Tell the truth to avoid this problem.
    
10. "We have no idea what we're doing with your prepayments."
    
    Many homeowners pay down their principal early, bit by bit. It's a great way to reduce your interest payments over time. But often those extra payments will sit in an escrow account -- and won't be credited toward your principal -- because your lender doesn't know what to do with them. Always keep accurate records.

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