Tips on Getting a Good Deal on Your Loan

Many times when purchasing real estate, unless it’s a cash transaction, a borrower will require a loan officer to process a home loan through a lender. The loan officer or consultant gathers the needed information and presents the documents to the underwriter in order for the lender to fund the loan.

However, the over-hyped real estate market in 2005-2006 demonstrated that the mortgage industry is not well-regulated and therefore may be open to fraudulent transactions.

But how can you tell if someone is not giving you the best loan suitable for you or is overcharging you. As a Realtor, I want to see my clients get a great deal not only on the homes they purchase but also on the loans attached to those homes. Below are a few tips to get a great deal on your loan.

1. “You are shopping around” – There are thousands of loan officers connected with different lending institutions that would like to process your loan. Do not be afraid to tell them outright that “you are shopping around” for the best loan. Loan officers will become more competitive regarding their rates and charges if they know they have competition.

2. Ask for a GFE – “GFE” stands for Good Faith Estimate. Most loan officers will provide you with a GFE if asked. I respect loan officers who provide the borrower a GFE even if they are not asked. If you find a loan officer who tells you that he or she cannot give you a GFE until you’ve picked out a house, quickly say goodbye to that loan officer. Loan officers are not obliged to provide a GFE prior to a contract, but it is good customer service for borrowers to get one up front upon loan approval or when a loan status report (LSR) is secured. As a Realtor looking after my clients’ interests, I want the mortgage broker they select to be up-front about their charges and other fees. A GFE provides the borrower with itemized closing costs such as lending fees and estimated title fees. Lending fees are fixed but the title fees (unless named), taxes, insurance, and HOA fees are estimates that will be determined once a house is picked out. You may compare GFEs from different lenders to get the lowest lending fees. Lending fees vary from $600 to over $1,000.

3. Loan Origination Fee is Optional – Some loan officers will include a loan origination fee of 1% in the closing cost. Investopedia, an online dictionary for investors explains that an origination fee is similar to any commission-based payment. If a lender takes a 1% fee for originating a loan, they will make $1,000 on a $100,000 loan, or $2,000 on a $200,000 loan. The origination fee helps to reduce your rate. Loan officers cannot require you to include an origination fee in your loan. This is one way for loan officers to make money. Be wary if your loan officer persuades you to include an origination fee or does not ask you if you would like an origination fee. It is optional and is not necessary.

4. Other Fees – Be careful of lenders who may include other fees that are unnecessary. The following itemized charges are standard lending fees;
a. Underwriting Fee
b. Doc Preparation Fee
c. Processing Fee

Different lenders (banks or mortgage brokers) will charge other fees that may include; wire transfer fee, flood certification fee, courier fee, application fee and more. Also, the borrower is charged an appraisal fee up front. This fee maybe credited to the buyer at closing if the seller is paying for the buyer’s closing cost. You may compare TOTAL lending fees by mortgage companies to find out where you can get the most savings.

5. Closing costs to benefit YOU, not the lender or title company – I have seen some loan officers require substantial closing cost assistance from the seller so they can inflate their lending charges or charge an origination fee or charge the borrower a buy down rate, thereby increasing their commission. Be wary of loan officers who act in this manner. They are not acting in your best interest and should be let go immediately. As an added service to my clients, I review the GFE and the HUD statements to make sure that my client benefits from the closing cost calculations so that the money contributed by the seller is used to help save my client money on taxes, HOA or other future expenses.

6. Choosing the right lender – Different lenders specialize in certain loan products. If you are obtaining an FHA loan, get a loan officer who knows this product well. If you are using a government down payment assistance loan, get one that specializes in that area. If you are planning on borrowing money for repairs on top of your mortgage, get a loan officer who is an expert in a 203 streamline loan. Choosing the right lender is key to getting the transaction closed. Let me know which products you are interested in and I will be happy to recommend someone who may be the right lender for you.

When choosing a loan officer, it is important to find someone who: 1) Puts your interests first; 2) Provides great customer service and is easy to reach; 3) Is connected with a reputable lender; 4) Is honest and reliable; and 5) Is knowledgeable about the loan products you need.