How to Pick the Wrong Lender
One day, you're interested in getting a loan. Your plan is
simple: Call a number of lenders and see who has the lowest
rate. You call the first lender. He asks you when you plan on
getting your loan. You tell him in a couple of months. He gives
you a low rate quote. And, after a number of calls, you find the
first lender you called has the lowest rate. When the time
comes, you know whom you'll use.
Now fast forward a few months. You call the first lender. His
rate is a bit higher than the last time you spoke with him. He
tells you that the rates have gone up a bit. He even invites you
to check around. Why do that? After all, he had the lowest rate
quote when you did your first rate search. You get your loan and
all is well, right?
Wrong! This lender used a trick that has become a dark part of
the mortgage business. You see, the first lender you called knew
you wouldn't be getting your loan for a couple of months, so he
quoted you a rate well below what is feasibly available to you.
After you checked around, you discovered his quote was the best.
Surprise! You KNOW he has the "lowest" rates because he had the
"lowest" rate quote the last time you called him. This technique
is actually taught by unscrupulous trainers and is, in my
opinion, shameful!
Here's another trick:
You call a lender, get a rate quote, even meet with him and
complete a loan application with the rate he quoted shown in
your package. Time goes by, your loan process continues and you
are now ready to sign loan documents. When you get to escrow,
pen in hand, you discover your excellent rate is much higher
than you were led to believe. The explanation: Your program got
a little more expensive, the rates went up, or whatever. If you
want the rate you were quoted, you will have to pay a couple of
more discount points to get it. For those of you who do not
know, one discount point equals 1 percent of the loan amount.
Nice, eh?
There are so many scams a dishonest lender can pull on you; I
would need a book to discuss them all! You definitely can be a
sitting duck for a lender who has his technique down. But what
do you do to protect yourself?
Easy! Don't just jump at the lowest rate quoted to you. Heck,
anyone can quote a low rate! But if it's not possible, what good
is the quote? More important than the rate, you need to know
whom you are dealing with. Investigate the lender before using
them. Get referrals from friends and relatives based on their
actual use of the lender, not based on what they heard or the
lender's polished ads.
Another great source (and my favorite, of course!) is your real
estate agent. That is, if your agent is someone you can truly
trust. Agents regularly work with lenders and these lenders know
that if they don't perform, they had better never set foot in
that agent's parking lot again, never mind their office. But
make sure your agent actually has first-hand knowledge of the
lender. Has he worked with him? How is he with clients? Is he
honest and truthful...even if it's bad news? How timely is he?
How are his costs? These are important things to know.
Also, be open to someone being honest with you. Don't go
searching for the answer that makes you feel good. Sometimes,
honesty hurts! If you look for that "good" answer, a
less-than-honest lender will sense it and they've hooked you!
Remember, your real estate agent is not only working for your
business, but also for your family's business, your friend's
business, everything. He would definitely want to ensure you
work with quality people who will take care of you as well as he
would. I know that's my philosophy.