The Mortgage maze is confusing to both consumers and real estate professionals.  For real estate firms that have their own mortgage company their preferred choice is their in-house lender.  Even though the law requires full disclosure, many consumers are drawn into the convenience of one-stop-shopping without comparing other lenders.

The truth is that most of us don’t know how to shop lenders.  We start calling various lenders to see what their rates are.  Then we hear about the bait-and switch games where one rate is quoted and later another is substituted and we throw up our hands in dismay.  In reality, the only rate that really counts is the rate available on the day you lock-in.

In addition to getting the best available rate there is the question of lender fees which can vary considerably.   Things like application fees, processing fees, underwriting fees, document preparation fees, discount fees, and hidden fees can be thousands of dollars difference from one lender to another.  Getting a Good Faith Estimate (GFE) from each lender is the only way to get anything close to accurate numbers.

Then there are various types of loans.  How do we choose from the myriad of available loans?  Is a fixed loan best?  How long a term should I pick, 15, 20, 30, or 40 year amortization?  How about an adjustable rate mortgage?  What about interest only?  Is negative amortization or an option ARM a better choice?   

To complicate things even more there are different types of lenders including banks, credit unions, mortgage brokers, mortgage lenders, etc.  We don’t know the difference, so we give up and settle for someone with a friendly face and a nice smile. 

So how do you shop for the best loan?  If we’re convinced that good homework will turn up the best loan program, how do we go about it? A buyer broker in Michigan, Jon Boyd, has a short, on-line http://howtomortgageshop.com“>video  that outlines a great approach to finding the best and lowest cost loan.   

It’s important to know your credit score before you start calling lenders.  Only call credible lenders and use the following script inserting your specific numbers. “My credit score is ____ and I’m looking for a 30 day lock on a ____ thousand dollar loan with no points.  Can you tell me what your rate lock is today and what your costs are like?��? 

Next you compare the Good Faith Estimates, identify the fees that are not lender controlled, and choose the lender that offers the greatest savings.  Even fees that are not controlled by the lender can vary.  Some lenders are able to negotiate better fees with their service providers.A good buyer’s agent can help you with this and help you match the GFE with the actually Settlement Statement you should get prior to closing.   

 

  

   

 

 

 

After a year of implementation how is the new Mass Agency Law working?
 

In July of 2005 a new law went into effect that changed the old agency disclosure form and included new ways for real estate agents to do business in Massachusetts.  Practically speaking, it did away with sub agency, the approach that said, “If a cooperating agent wants to show my listing and get paid they better work for my seller�.  It also introduced a replacement option for Dual Agency called Designated Agency and formalized a non-agency relationship with consumers called Facilitator.

Now that summer of 2006 is ending, how has it gone for the past year of this new law?  My experience as a real estate instructor is that there is mass confusion in the field.  Real estate agents feel the new disclosure is very cumbersome and confusing.  Many are not sure exactly what sections of the form they should fill out and sign.  And there are still those who want to change hats midstream when the particular approach they have agreed to follow is financially penalized in the MLS offer of compensation.

State-Mandated Minimum Service Laws – What about the Buyer?  There has been a lot of hoopla over recent months about setting minimum listing service standards in real estate practices across the country.  The Department of Justice has decided to challenge these laws indicating that they are a restraint of trade for new business models.   It seems the Federal Trade Commission agrees.  Specifically, these laws have forced some flat-fee listing companies out of business because the whole concept of a flat fee is typically minimal service for a minimal fee. The industry seemed to say,  ”You can accept minimal compensation but you can’t give minimal service”.