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115 Comments
- slieberman, on 02/01/2008, -2/+23Given the collapse of the sub prime market for real estate and the current big reductions in interest rates in the past week this is key information right now!
- agentsully, on 02/01/2008, -0/+18know when to walk away!
- inactive, on 02/01/2008, -1/+19Being an ex banker for 15 years and then a broker for 6 , most of them are arrogant ***** and would screw their own granny to make a buck so what hope has the normal person got.
- ifnotme, on 02/01/2008, -1/+15I always knew brokers were shady, but it is nice to know their tricks.
- T8erT0T, on 02/01/2008, -0/+9As a realer estate closer (person who represent the lenders at time of sale, no I'm not an attorney, duh, I'm on digg), I can tell you that people get royally screwed with their brokers and the premiums these bastards get are insane. The worst part is that everyone seems to have it out for me because I'm seen as "the evil bank who sticks them with a mortgage", but they rarely get a chance to see the mortgage broker who's making out like a fiend on the sale. Sure it''s on their HUD statement, but they're usually too impatient to even read what the fees are they're paying. I'm glad to see people catching on and like this article.
- Chompy, on 02/01/2008, -1/+9Then slowly regaining value after the correction is over, taking tax breaks on the interest, and keeping your money.
- davecor, on 02/01/2008, -0/+6I've seen lots of businesses who charge difficult customers more than nice ones... we called it "***** tax".
- hidefchef, on 02/01/2008, -0/+5I agree, if you are smart get more than one quote and compare them, but rates change on a daily so get it all at once so you get a fair view of the market. Great tips for all in a pinched soft market we are in.
- woofers07, on 02/01/2008, -0/+4and equity.
- ifnotme, on 02/01/2008, -0/+4Of course after reading this article, how do you every trust your broker. I mean if you get punished for making sure you aren't being ripped off, is there any hope at all?
- manicallday, on 02/01/2008, -0/+4The good faith estimate is useless. What you want to know is the APR which is located on the first box of the Truth in Lending document. The APR equals the interest rate plus closing cost. Thus, the closer that number is to the actual interest rate the better.
- inactive, on 02/01/2008, -1/+5I hate ***** clip art and stock photos.
- jpike76, on 02/01/2008, -1/+4Got to know and trust your broker, which is easier said than done for first and even second time home buyers.
- hierophantus, on 02/01/2008, -3/+6Even if your home were worth $1, you'd come out ahead in equity compared to renting.
- xstarsprinklesx, on 02/01/2008, -0/+3Just like in every industry, there are greedy jerks like this Jack loser and there are good guys. Not all brokers are like this; I'm a processor at a mortgage company and one of the reasons we're still in business when so many others have gone under is because the brokers there are honest. It's just like any serious business dealings you do, don't just go to the first random storefront you see. Ask questions, get references, whatever you want to do until you feel totally comfortable trusting someone. Don't sign anything you don't understand. The right broker will be on your side, and you should know what all the fees are going to be and what they're for. If you don't know, ask! If they won't tell you, they're probably shady.
- akatherder, on 02/01/2008, -0/+3Our mortgage guy called us two days before we were supposed to sign the papers. He tells us they underestimated the tax and we need to front $2000 more at the closing than the good faith estimate said. I just said, oh ok nevermind then, we'll have to keep looking. He acts shocked and starts accusing me of wasting his time, yadda yadda yadda. I told him, I felt the same way and I felt cheated as well. He calls back the next day and says they can work the numbers out so we don't have to put any more money down. I had already booked a new loan with the interest rate a notch lower anyways.
- mblasses, on 02/01/2008, -2/+5Interesting article, but I don't think "Jack" exists. Too much incorrect info. As a mortgage broker in Michigan for 14 years, I can tell you, there are certainly a lot of seedy mortgage brokers. Much of what the article says is true... Mortgage brokers often pad costs and do a "bait and switch" at closing, which leads to high commissions for the broker. However, in "Jack's" 5 years of mortgage origination, he seems to have gotten a few facts mixed up. 1. an "admin", or administration fee is usually a legit fee, charged by the mortgage broker, to defray costs associated with staffing. Note, this is not always the case, and it has been abused. 2. a "processing" fee is almost ALWAYS a bogus fee. The only time a processing fee could be legitimately charged is if it goes to a third party. For example, a small mortgage shop that doesn't have its own processors. In that case, another "processing company" would be the beneficiary of the fee. 3. Fees that are charged on a HUD going to a third party can't be inflated. In other words, if there is a $100 charge for a credit report, all of that money would have to go to the credit reporting company. If the money was split up later, the state's mortgage bureau and HUD would be all over it. This is something that is just not done. Same thing for the title fees. Either Jack has never inflated a title fee and still works in the industry, or Jack has inflated a title fee and Jack now works at McDonald's. 4. By law, Good Faith Estimates only have to be within 50% of the actual costs! (scary, huh?) Great article about how some loan officers think, however! The last few paragraphs are especially true. ALWAYS check around for rates and fees, and compare them at the same time. Also, never be afraid to walk away from the closing if the numbers are different from what you are quoted. You may tick a lot of people off, but it's your life, and your checkbook!
- absurdist, on 02/01/2008, -0/+3Very simple. Hire a lawyer to look over the mortgage contract for you. Yes, I know, all lawyers are sharks, yadda yadda, but a house is likely to be one of the single biggest purchases of your entire life. It's worth $500 - $1000 in lawyer's fees to make damned sure that everything is on the up and up. When you're dealing with the bloodsuckers that are mortgage brokers, it never hurts to have a bloodsucker of your own.
- ReikiMaster, on 02/01/2008, -0/+3I used to be a loan officer and made a decent living at it. Not all loan officers are crooks and I would even go so far to say that most are honest people trying to make a living. Most of the points in the article don't happen often and most are considered fraud. The only thing I agree with was the last point about shopping around. If I had spent 40 hours of my time working on somebodies loan only to have the walk thinking they could get a better deal. I would be pissed. They may come back when the deal they thought they were getting wasn't as good as the one I was working on. At that point my loan origination fee just doubled. I no longer trust them and I expect them to walk again.
The average loan is a 1 point (1%) origination fee. The loan officer will also make an average of 1 point from the lender. If somebody was nice or giving me repeat business I would often wave the origination fee and make my money solely from the lender.
The only advice I have is go in there and ask for a good faith estimate. This will list everything and only takes a few minutes to work out. If what you see doesn't seem appealing then get a second opinion. Most loan officers won't and don't mind you shopping them around at this point. If you shop around on the day of your closing you will find you just made a new enemy. Loan officers talk to Realtors, and escrow companies. You may just find that the next time you are shopping for a loan everything is suddenly more expensive. Nobody will trust you at that point.
Oh yeah, the most important thing. READ YOUR CLOSING PAPERS. Just because most people aren't out to screw you doesn't mean that nobody is. If you sign a bad loan that isn't what you thought you were signing then its nobodies fault but yours. Somebody should be on hand to explain every page to you, but you should still read what you are signing. If things don't match up to your good faith estimate then something is wrong and its time to start asking questions...lots of them. I know that there may be 100 pages or more...but still read them.
I hope some people will find this illuminating, but I expect to be buried fairly quickly. - Tweekster, on 02/01/2008, -0/+3Does anyone believe this was actually a "confession"
It was simply a good tips article disguised as somehting more to get hits - cliffzdude, on 02/01/2008, -0/+3 Currently, rates are low due to a LOW-LOW demand for mortgages. One nice silver lining in this huge mess.
However, the cost of money mortgage money, or interest rates are not driven by the Fed's rate reductions. Actually they often have a contrarian response to interest rate reductions by the Fed. People far and wide hear "rates were dropped!" and they finally make the jump, refi, or pull the trigger on that purchase they were hem hawing over. Demand goes up, interest rates (the cost of money, or "price" you pay) also goes up.
One key the article forgot to include, mortgage brokers LOVE big Fed rate drops; their phones start to ring again. Again, due to the misconception that the Fed's reduction of short (often overnight) rates have something to do with long term rates. Mortgage rates are more tied to the cost of long term money, so the indicator here is the yield curve you see on 15-30 year treasuries, corporate, and muni bonds. - sgiffy, on 02/01/2008, -0/+3I've seen people spend more time researching and debating buying a vacuum then a house. Ask them about the ***** vacuum and they'll go on and on about it, ask them what the APR is on their home loan and they'll stare at you blankly before telling you their payment is only X.
Pretty sad when you realize that a 1% difference on the average home could buy 10 vacuums. We really need financial education in High School. - woofers07, on 02/01/2008, -2/+4Yeah, cause there's nothing better than pissing your money away to a landlord.
- QuickeningYak, on 02/01/2008, -2/+4I'm surprised ...no, stunned... that a person would sign a loan contract WITHOUT KNOWING THE TERMS OF THE LOAN, especially a house loan. It's the single largest and most important loan in almost any borrower's life, and they would trust the word of a damned mortgage broker ?!
That is seriously, seriously stupid.
Seriously. - gudnbluts, on 02/01/2008, -0/+2We don't all have to start singing about AIDS do we?
- inactive, on 02/01/2008, -0/+2Nope. In fact the brokers are a big part of why the subprime market got so crazy. Just one example I'm aware of (because I listened to the conference call) JPMorgan Chase had, I believe, 3 times the default rate for loans originated with brokers as compared to loans originated in their branches.
No no, you don't need a broker and, as this article shows, there is a decent chance you'll be dealing with an asshat if you do. - hierophantus, on 02/01/2008, -1/+3Just horrible advice. What are you trying to do here?
- hersh006, on 02/01/2008, -0/+2I had a broker use a lot of the same techniques on me. Wish I had read this before that deal.
- Rikkochet, on 02/01/2008, -0/+2Well, if you're not a granny, you've at least got that much...
- shinda, on 02/01/2008, -0/+2I use to be a broker and it wasn't about being shady. I did what I could for some, but some people where ***** so you just throw out numbers hoping they leave you alone, but some people stick around. But I'll admit theres a lot of under the table type deals happening, especially considering there are brokers who are able to move people making less then minimum wage with no jobs into high end houses by forging the documents and working with lawyers they got. Once the bank for closures on these people more times then not they can't afford the legal fee's so a lot of brokers go free..
- morgino, on 02/01/2008, -0/+2Ha..being a loan officer I do the same thing. Seriously, wouldnt you? If I have someone who is very nice and has some issues and is trying there best to get there act together then I will give her a break. Then again if I have some douchebag who is always rude and doesnt treat me with the respect I deserve then I will milk them for what I can. Seriously, wouldn't you do the same thing? I have learned over the years that when I deal with anyone in sales I try to be as respectful as possible without being a pushover, that advice will save you thousands over your lifetime. Cable bill, phone company, mortgage, whatever, do it and you will see results.
- ostracize, on 02/01/2008, -0/+2Hey, in the States do you have to go through a broker?
- pahoehoe, on 02/01/2008, -1/+3True, but every industry has their shady participants. This is certainly not unique to brokers.
- inactive, on 02/01/2008, -0/+2this isn't anything new, and there's nothing wrong with it - you don't turn down business, you just price it out of their range so they go bother someone else. Me and my friends have done it for freelance web development - and you know, the anticipation of making ten times your normal rate makes working for an ***** a whole lot easier to put up with.
- silveravnt, on 02/01/2008, -0/+2When I was a kid we did the same thing at Pizza Hut. It pays to be friendly.
- hierophantus, on 02/01/2008, -0/+2Listen to Kenny Rogers before you negotiate. The Gambler will change your life and save you big $$$.
Also, if you look like Kenny Rogers, mortgage brokers will fear you. So, there's that too. - Dewhead, on 02/01/2008, -0/+2Steakneggs,
Do you get the chance to review the borrowers credit as well? This may be another reason for additional "points". I had a client that had crappy credit but alot of cash. He wanted a great rate and was willing to pay for it (points) The loan officer went over it severals times about how he was buying down the rate and he agreed. Then when it came time to close, he freaked out and acted like the lender was trying to screw him. Thank God, I kept detailed notes about the conversation but he started to say that I was "in " on it. Jeez, finally I told him that he should definitly not close on the home if he felt that something wasn't right. I told him we will cancel the loan and the sale--he could get his money back and get another agent and lender if felt he felt "screwed". He didn't and closed. - Devrdander, on 02/01/2008, -0/+2This is why i take all my loans to my Credit Union. My last 2 mortgages, in both cases, the brokers all flat out told me they can't compete with a credit union (didnt want to even try), and that unless i want to do something Unorthodox like 0% down etc, that I was better off going there.
- greenmile, on 02/01/2008, -0/+2Redfin.com
- inactive, on 02/01/2008, -0/+2"Mortgage Brokers make clients pay higher rates to increase profits"
OMG MY WORLD IS SHATTERED BY THIS REVELATION!!! - ngmcs8203, on 02/01/2008, -0/+2Nope. You have the option of going directly to a bank, that is, if you are a) not lazy enough to do your own research and b) not a complete dumb ass. Brokers charge points to do the work of finding you the "best" loan. Then they charge you middle-man points.
- inactive, on 02/01/2008, -0/+2Actually it depends on your situation and where you live. Property taxes in some states are so high that it takes literally years to build any real equity. Add on maintenaince costs and sales agent costs(when time to sell) in less than 5-10 years and you could be easily be upside down if you need to relocate or even worse go into foreclosure if you have to get out, i.e. divorce, lost job, relocatio, etc.
Renting is great for people who may need to relocate and they can keep their credit line in good favor.
Real estate is NOT the great investment everyone touts it to be. I think most people digging down people saying "rent" are mostly home owners. - sgiffy, on 02/01/2008, -0/+2Thats why buyers should never get to excited about a particular house. There are a lot of houses out there, and one should never place 'I just love this house' over prudence. The process of finding and buying a house, might and really should in most cases, take months not days.
- Dewhead, on 02/01/2008, -0/+2Very good point. I think anyone who purchases a home and doesn't know the financial terms of their loan is a fool. A person who doens't know that they have a balloon or an arm after they buy a home is an idiot. If they sign it, they agreed to it and shame on them for not reading it or asking questions if they don't understand.
- selfobsessed, on 02/01/2008, -0/+2I'm only 21 and got my mortgage brokers license recently and my real estate license and from what I've seen some of these people are the shadiest bastards ever. The point of the whole entire thing is not to be such a pain in the ass that nobody wants to work with you or take all of your money but to be astute enough that you simply ask them all of the different terms and conditions of the loan.
It's not much to ask for and if they don't tell you or act too high and mighty I would suggest dropping them. Also, it's not that difficult to sit down and read what's going on in the loan itself. - davecor, on 02/01/2008, -0/+2I don't think many people realize they are paying a price for being jerks.
- PabloMac, on 02/01/2008, -0/+2What you omitted is that people who make broad, sweeping generalizations all suffer from lack of credibility.
- execute85, on 02/01/2008, -0/+2Yeah, just how my grocery store has an "admin" fee on my receipt to defray costs associated with staffing. This is extra profit. If you are a mortgage broker and want a secretary, don't try to charge a lender for that privilege.
This reminds me of when my car salesman tried to charge me an "admin" fee to pay for the cashier. This is the stupidest thing I've ever heard.
There's something called overhead and it's already calculated into your margin. Trying to invent fees to push up your profits makes you look greedy and stupid. - thcobbs, on 02/01/2008, -0/+2Sure, buy the house without a mortgage.
- Dewhead, on 02/01/2008, -0/+2It is alot to take in and each state is different. Your suggestion about getting a real estate lawyer to advise them is a good one.
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