Purchase Horror Story - Don't Let it Happen to You

A Realtor that I have helped in the past called me today to share a story of one of his clients. His clients, like many savvy mortgage shoppers, went online to shop multiple mortgage companies to find the best rate and program before they started looking at houses. They found a lender that offered them a rate that was almost 0.50% lower than any of the lenders. They found a house they really liked, put in an offer, and every thing was great until the day before closing.

They called the lender to discuss what the final payments, closing costs, and how much money they would need to bring to the closing. What they found out was that their interest rate was almost a full point higher than what they were originally quoted. The lender would not budge on the rate stating that rate changes and they could do not any thing about it. They could not change lenders as the closing was tomorrow and they really wanted the house so they could not back out (if they did back out they most likely would have lost their $3,000 in earnest money). They were forced to close on the mortgage and take the mortgage with the higher rate.

It's tough to say if the mortgage lender was acting fraudulent, and I hate to speculate on what happened, but at the very best, the lender exercised very bad communication. One thing many people don't understand is how often and how big rate fluctuations are in this market. If you obtain a rate quote today and don't close on your house for 60-90 days your rate will more likely be different, however, the lender should communicate any and all changes in rates.

How can you protect yourself from this happening to you? It's pretty easy to avoid this type of situation by following a few simple steps.

1. Do business with some one you trust and was REFERRED TO YOU.
2. Talk to your lender about lock options, you can typically lock your rate for 30 days at no cost and longer if you are willing to pay a little more in closing costs. It may be worth to pay a little more in closing costs if you and your lender believe interest rates are going to increase.
3. If you talked to a lender about rates before you found a house and didn't lock the rate, ask them again what your rate will be once you have a contract on a house.
4. Once you decide to lock your rate ask your lender to fax/email you the lock confirmation. Every lender has the ability to do this and if they say they can't or won't I would find a new lender. A good faith estimate (GFE) is not the same as rate lock, it just an estimate of your rate and closing costs, but things can change (see story above).
5. Ask your lender to email/fax you the closing docs before the loan commitment date on the purchase contract. If you find a problem with the loan before the loan commitment date you are more likely able to extend the contract (and find a new lender) or terminate the contract with out losing your earnest money.

While most mortgage professionals are honest and professional individuals, as in all business, there a few bad apples or people that just don't know what they are doing. Make sure you take every step to protect yourself. If you have any questions, please feel free to call or email me.

Prosperity Financial - Your Mortgage Manager

http://www.colomortgage.com/

http://www.myprosperityfinancial.com/

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