Mortgage Tips and Myths

Written by Nina Krosch

You know you need a mortgage loan, but you don't know what questions to ask and/or don't know what's involved. All the loan programs and paperwork can be confusing. When my husband and I bought our first property I refused to consider a 2nd mortgage because I remembered hearing that 2nd's and 3rds were "bad." One of the main reasons to have a 2nd mortgage is to avoid the expensive mortgage insurance, commonly referred to as "MI.." I didn't know the the 2nd would have saved me about $100 a month! I also rejected the idea of an adjustable mortgage, which would have made sense since my husband and I sold that property after only two years. I was stubborn, okay, I still am, and knew very little about the options available. I wish I knew then what I know now. That knowledge would have saved me a lot of heartache and hard-earned money! Here are some tips to help you become a savvy consumer so you can make wise financial decisions for your future.

Anyone can be a loan officer - myth
There is some truth to this! Some mortgage brokers hire anyone as a loan officer who appears motivated, regardless of experience, knowledge about the industry, or whether or not they have a license. In California, loan officers are required to be licensed in order to legally quote rates and terms, but that doesn’t mean everyone is following the law. Do you want to work with someone who is doing business illegally or can’t give you a rate quote or discuss loan programs? Ask how long they have been in the business and to see their license.

Credit Scores are not affected if a lender or a mortgage institution pulls a credit report - myth
I spoke to many people about this, but received various answers so I called Advantage Credit to get the facts. This is what Kevin from Advantage Credit in customer service told me: every time there is a credit inquiry, a person’s score drops from 3 to 10 points. Don’t let everyone pull your credit!

All licensed loan officers can do loans and sell real estate - myth
Licensed loan officers are also real estate agents, but not all loan officers can sell real estate unless there is a separate real estate division set up, if there is, it’s sometimes under a different company name.

It’s a loan officer’s fault if the loan does not close in time and the lock expires
There are numerous factors as to why loans don't close by the lock expiration date, but let's backtrack on how the rate is locked. The loan officer locks your interest rate by faxing over a lock form or by filling out a form on-line for a specified period of time. The loan officer has to determine when s/he believes the loan will close. A 30 day lock is typical, but some big lenders are so busy they admit it will take at least 45 days. Usually, the longer the lock, the higher the rate. You can lose the rate quoted if your loan does not fund and close in time. Your loan officer can delay closing if s/he does not follow up and gather information in a timely matter, but sometimes it’s the borrower’s fault they’ve lost their lock. If you are asked for information, send it over that same day, the next morning at the latest. Losing one day can mean the difference of a rate that was 6%, and is now 7%.
Sometimes the appraiser holds up the loan. Appraisers, who are inundated with work, sometimes take two to three weeks just to come out to the property. Add another week to complete the appraisal and you’ve lost three to four weeks. It’s highly unlikely a loan will close in 30 days if appraisers take several weeks, but an appraiser is just one link in the chain. There are many people involved in the loan process: loan officers, lender representatives, assistants, processors, underwriters, appraisers, title and escrow officers, insurance reps…unfortunately, one individual who doesn’t hold themselves to task or who slacks off can cause the whole transaction to slither down the drain. So before you place the blame, ask!

All loan officers lie to make a sale - myth
“My loan officer said my rate was 7%, but at signing it went up to 8.5%. He lied to me!” Not all loan officers lie. Even if a loan officer locks your rate, you are not guaranteed that rate. Here are some reasons why: the appraisal came in at a lower value, the lender’s rep misquoted the rate, the borrower’s situation doesn’t fit the lender’s guidelines, the credit score dropped, the underwriter calculated the income differently, or a late payment later appeared on a credit report. The interest rate the loan officer quotes is an estimate, that’s why the initial disclosures are good faith estimates.

Where a loan officer works is inconsequential - myth
What brokerage the loan officer works for is important. A new brokerage many not have enough lenders on their approved broker list to give clients the best rates or options. New businesses have a higher chance of failing and have a tendency to be disorganized in the beginning. Also, visit the loan officer. Is it a fly-by-night organization? Is the loan officer’s office messy? If it takes a while for the loan officer to find your file, beware.
Here’s some good news. You can improve your chances of finding a good loan officer. Meet them. Is the loan officer friendly? Do your personalities collide or mesh? Check to see if the loan officer has a clean and organized office with a computer. Get a fee estimate. The loan officer can give you an approximation of what your fees will be, but they may not be able to quote rates the minute you call since they need to do a full analysis and shop your loan to give you a true picture. Fees range from broker to broker so find out what they are. Visit their office. Make sure the office is set up and won’t disappear in a month. Look around to see if they have the latest technology. You don’t want to be stuck on eternal hold or have to leave a condensed message with a receptionist because the company doesn’t have voicemail. Trust your gut. If you don’t feel comfortable, go elsewhere. Ask. Ask the loan officer if he owns property. If a loan officer can’t qualify to get a mortgage, how can he qualify to get you one?