Can I really get a "no closing cost loan"?
Every loan has transaction costs-there is no such thing as a "no closing cost loan". In a "no-out-of-pocket-cost" loan, the mortgage closing costs are added to the principal dollar amount of the mortgage loan. You may not pay the closing costs out of your own pocket at the mortgage closing by check or cash, but the closing costs will be added to the total principal dollar amount of the mortgage you are borrowing. The closing costs will be itemized by the title company clerk on the HUD-1 Settlement Statement you will receive at the mortgage closing. You will be paying these financed closing costs over the total years of your mortgage at the same interest rate as the mortgage principal (Todd Rokita, Indiana's Secretary of State, 2003).
My Mortgage Broker told me that if interest rates drop further from my present mortgage interest rate, they would do a "free" refinance of my mortgage at the new lower interest rate. Is this true?
Every real estate closing has costs. There is no such thing as a "free" refinance. If such an offer is made, get it in writing, signed and dated, with the signature of the principal of the Mortgage Broker business. Statements like this by a loan broker are "puffery" to try and hang onto your business (Todd Rokita, Indiana's Secretary of State, 2003).
The mortgage broker said I could quit paying on my old mortgage. Is this OK to do?
Do not quit paying your old mortgage-regardless of any promises that the mortgage broker makes-until you close on the new mortgage. If you rely on the mortgage broker's oral promises-and quit paying on your old mortgage before the closing of the new mortgage-and the closing goes bad and does not get funded-you may find your credit wrecked and your lawsuit against the loan broker resulting in an unenforceable judgment (Todd Rokita, Indiana's Secretary of State, 2003).
Can everyone get the lowest mortgage interest rates available?
False. A mortgage is a credit-based transaction. The interest rates you are offered will be based primarily on your credit report, credit score, and the value of the property that you wish to purchase/refinance (Todd Rokita, Indiana's Secretary of State, 2003).
I have bad credit can I still get a loan?
"B-", "C" and "D" loans are called sub-prime loans. Sub-prime Lending is a specialized lending market for consumers with bad credit. Many mortgage brokers do not represent sub-prime lenders* Depending on how risky a loan you are (based on your credit report and your credit score-loans are graded "A", "B", "C", "D" based on your credit information)-you may be looking at a mortgage broker fee of from 1% to 10% of the mortgage loan amount. (Todd Rokita, Indiana's Secretary of State, 2003).
*Waterstone Mortgage Group does represent sub-prime lenders.
The mortgage broker offers you a "free" real estate appraisal as long as you close on a mortgage loan originated through them. Is this true?
Although it is acceptable for the mortgage broker to offer you a free real estate appraisal as an inducement for you to do business with him/her, be prepared to be charged for the appraisal if you decide to take your loan business elsewhere. The offer of a "free real estate appraisal" should be in writing, with an explanation if there are restrictions such as a requirement that you close the loan through that loan broker and his lender (Todd Rokita, Indiana's Secretary of State, 2003).
More on the real estate appraisal.
The real estate appraisal is one of the potential lender's application requirements of you the proposed borrower. The purpose of the real estate appraisal is to assure the lender that the market value of the property you are proposing to buy or refinance is high enough to cover the dollar amount of the mortgage loan if you default, and the lender has to foreclose on the property to sell it to recoup the money to cover the defaulted loan.
You are entitled to a copy of the appraisal under the federal Equal Credit Opportunity Act ("ECOA"), if you have paid for it. You have to request the copy in writing from the loan broker. The original real estate appraisal does not have to be provided to you for reuse with another mortgage broker or lender if you decide to take your loan business elsewhere. Most lenders have their own real estate appraisers they use on a regular basis. Lenders are not required by any state or federal law to use the appraiser of your choice (Todd Rokita, Indiana's Secretary of State, 2003).
What happens if I refuse a mortgage loan offered to me by the mortgage broker or withdraw my application?
If you decide to refuse a mortgage loan that the loan broker offers you, he/she is still entitled under the Act to collect the actual cost of the bona fide third party fees of the credit report, flood certification, Freddie Mac's Loan Prospector, real estate appraisal, title insurance, and any real property survey from you, if these services were actually performed. The Act permits the loan broker to collect the actual cost of these third party fees from you prior to the mortgage closing. You are entitled to written proof that these fees have been incurred, the identity of the third party service provider, and the actual dollar amount they charged for their services (Todd Rokita, Indiana's Secretary of State, 2003).
The fees listed on the mortgage broker's Good Faith Estimate (GFE) seem really low and/or some fees are not listed. Is this a "red flag"?
YES. This is a common practice of unscrupulous mortgage brokers. A Good Faith Estimate is provided but the closing costs are very low and/or some fees are not even listed. When you go to the closing the closing costs are actually higher than what was listed on the original GFE. This tactic is used to get potential borrowers "on board" with that particular mortgage broker (making it appear as if the fees listed by another mortgage broker are much higher) and then slamming you with additional fees at closing. BEWARE OF MORTGAGE BROKER'S GOOD FAITH ESTIMATES WHERE THE FEES APPEAR QUITE LOW.
Note: There is no Indiana law that specifically limits the amounts of closing costs, mortgage broker fees, mortgage origination fees, processing costs, and underwriting costs that the lender and loan broker may attempt to charge you.
There is no legal requirement that the estimated closing costs on the "Good Faith Estimate of Closing Costs", equal or be within a certain percentage of the actual closing costs. RESPA does not provide a specific remedy if the HUD-1 Settlement Statement Closing Costs are higher than estimated. The Good Faith Estimate of Closing Costs is a written estimate to give you an idea of the closing charges, including the mortgage broker's fee and his/her yield spread premium fee from the lender, if any (Todd Rokita, Indiana's Secretary of State, 2003).
What documents will I have to provide?
Most lenders will require proof of income and assets before approving your loan, and may require other documents as well. Buyers with excellent credit may qualify for a no-documentation, or "no-doc," loan, but they can expect to pay a hefty down payment and higher interest rate (Erin K. Witt, Indianapolis Star, 01/04/04).
How much of a role does my job history play in getting a mortgage?
Most mortgages require the verification of a two-year work history. But length of employment is only one of the factors at play when trying to qualify for a mortgage. More important is your type of compensation. Are you salaried, hourly, commissioned or self-employed? If you are newly self-employed or have taken a commission only job for the first time, it will be much more difficult for you to qualify for a mortgage. In both of these cases, the lender will typically base your income off a two-year average of your income as reported on your federal tax return. The main thing an underwriter will look for is the stability and likely continuance of your income (Joel Epstein, Indianapolis Star, 01/04/04).
Why Am I Better Off Going Through a Broker Rather Than a Bank or Credit Union?
"Mortgage Bankers" (banks and credit unions) typically are not able to place a wide variety of loans due to their limited product line. As a full service Mortgage broker, Waterstone Mortgage Group, LLC has the ability to deal with a multitude of lenders from across the U.S. Mortgage Bankers also are forced to sell rates at "above par rates" while still charging the normal closing costs. Dealing directly with the lenders allows us to avoid this problem.
