When you apply for a home loan with a mortgage broker you expect that broker to be professional, honest and work on your behalf to get you the best loan rate and terms. That's what happens in 99% of all mortgage broker transactions but what about that dishonest 1%. What are the common mortgage broker tricks they play and how can you protect yourself from them?
The Common Mortgage Broker Tricks
The Old Bait and Switch: This is the most common trick played on borrowers. Usually the mortgage broker will advertise and extremely low rate. Borrowers respond to this advertising and find out that the low rate offered is either on a short term ARM or that it will cost the borrower thousands of dollar in points and fees to buy the rate down to the low level.
Solution: Always ask the mortgage broker to provide yo with a Good Faith Estimate for the loan program being offered. The Good Faith Estimate will break down loan terms and fees so that you can make an informed decision. You should also avoid mortgage companies that use this tactic altogether.
Rate Switched at Closing: One of the classic mortgage broker tricks and very obvious to spot but it is still used by the slimiest of the slimy. Basically the mortgage broker promises all along a rate and loan program the borrower wants. Then the borrower gets to the closing table and what was promised to them is completely different. This mortgage broker trick is more common in purchase transaction then in refinances but is equally frustrating to the borrower in either situation.
Solution: Always get a Good Faith Estimate and a Rate Lock Letter that is signed by you and the mortgage broker.But the bottom line is that if you were lied to you should get up from the table and walk away. There is no law that says you have to close the loan if you are unhappy with it.
Scaring The Borrower: This is one of the most common mortgage broker tricks but it is not as well known as the other ones but is used a lot more. What the mortgage broker does is find out why you are refinancing and use it against you to charge more fees and get a higher commission. For example if you are adding an addition onto your house the broker will tell you to go ahead and start the project because your loan is 100% guaranteed. They will then call you usually a day before closing telling you either your credit score dropped or loan program guidelines changed and you now need to pay for a lower rate or switch to a higher interest rate loan program. Many borrowers may be startled and stressed into closing the loan. Because it is so effective this is the most popular of all the mortgage broker tricks that dirty brokers play!
Solution: Ask for documentation to support the credit changes. Any change in credit status can be clearly shown on the credit report. If the mortgage broker cannot support their claims call another mortgage company or bank and ask them to quote you a mortgage loan.
Although the vast majority of the nations mortgage brokers are honest there is that small percentage that are not, knowing the mortgage broker tricks that they play and how to spot them can save you unnecessary emotional and financial stress when you need a new mortgage!
Darin Sewell is a Wisconsin Mortgage Broker that compiled a HUGE Mortgage Library for consumers to educate themselves on all things mortgage related and protect themselves against bad brokers.
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