Long Beach Home Purchase - Financing Rip-Offs To Avoid
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Long Beach Homes, Realtors...
... and Lenders Oh My!
As a Long Beach Realtor many buyers contact me in need of other services. We Realtors generally have a group of vendors that have become valuable team members. Vendors who have proven themselves over the years to provide great customer service and care for our clients.
The sub-prime problems have really shaken up the industry and have changed not just the way loans are approved but relationships between Realtors and their preferred lenders.
Recently I sent a buyer to a local Long Beach Lender, who we have used occasionally on and off for several years. The client needed credit cleaning so they would be in the lenders hands until such time as they were ready to begin their house hunt - about 2 months was estimated. I made a follow-up call to the lender, about 5 weeks into the 2 months, to check on their progress and asked "How are things going with Mary and John?" He replied "Who?". I was stunned! He quickly remembered who I was referring to and then told me that the credit cleaner had some personal issues and it didn't work out. HUH? No calls to me and my buyers were left unattended. The lender apparently didn't understand the level of trust that was placed in his hands.
He called the buyers, brought them into his office for a 3 hour meeting and arranged a loan for them, then called me to let me know what he had done and the terms of the loan. He complained about a collection on Johns credit for $130 and one on Mary's for $30. Both were items in dispute that they did not owe, minor junk that should not have mattered. As a result he quoted them an additional 2% interest on both the first and second, jacked their fees up to over $14,000 plus a $6500 origination fee and told both the buyers and myself this was the best they could hope for. When I asked him if he was actually going to be able to close this loan he said "I hope so?". Well folks, that is just no-where near good enough for me or my clients. He is soooooo fired! I call this kind of work shlock and there is no place for it in my business, not now, not ever!
Mary and John came to my office the next day. We spent the entire day together. They called Brian Brady, Americas Most Opinionated Mortgage Broker who laid out a very do-able financial plan for them. They were treated with respect, loans were arranged for them-at very reasonable interest rates, pre-penalty's were done away with, a financial plan was put into place for the buyers to re-finance both loans in 6 months and make their dream of owning a Long Beach Home come true, without getting raped financially. (There is enough equity in this Long Beach property to allow this strategy.)
Mary and John opened escrow yesterday on a Long Beach Home that they are ever so excited about.
Brian provided us with a loan-commitment letter immediately. For those of you who are unfamiliar with this term let me explain this in simple terms. Unlike the run of the mill loan brokers, Brian is a Direct Lender. That means that the actual lenders trust him so much they have given him the power to approve the loan, based on their guidelines, himself. Brian is the end of the line. If Brian says you are approved, you are approved!
I would like to explain the value of a Loan Commitment letter (or lock-in letter).
- It tells the buyers they definately have the loan that was quoted to them and provides them with security and negotiating power.
- It tells the buyers agent that the loan will close and their work will not be in vain. In todays market this equates to negotiating power folks and I just love to negotiate.
- It tells the seller that they have a secure escrow that will close without any loan problems, worth giving up a few dollars for, especially if you have fallen out of escrow once or twice already.
- It tells the listing agent that they are dealing with professionals and a secure transaction. A smart listing agent will advise their seller that this is a 'best possible scenario' situation and worth giving a bit for.
- It provides a transaction in which everybody WINS.
Any lender who cannot provide you with a LOAN COMMITMENT LETTER within a couple of days, has not secured the loan on your behalf. No matter what they are telling you!
This is the reason so many Long Beach Homes are falling out of escrow. Agents do not know enough about the loan process to demand lock-in letters, or loan commitment letters from the buyers lender.
Listen closely Buyers: If you have a loan commitment letter, you do not have to worry about being Baited and Switched.
Bait and Switched, hmmmm, how does that happen? Well a realistic lender quotes you a rate that makes you gasp for air. Your FICO is not great but it's OK, you have had some late payments, your salary is OK but not really outstanding, and you want a better rate, so off you go shopping.
Be careful they are waiting for you.
You speak with several lenders who assure you that the big bad OTHER LENDER was just ripping you off, but they can get you such a deal:" ("Do you know that old saying? If it sounds too good to be true.... it probably is.") So you go ahead and sign on for the lower rate. Don't feel bad, a lot of other people have fallen into this same trap. These lenders are charismatic and convincing. But they do not provide you with a LOAN COMMITMENT LETTER, because they cannot, they have not secured the loan.
A couple of weeks into your escrow the big bad lender calls the poor little buyer and states "You know that loan I mentioned (no commitment words being minced here) well that program has been discontinued, but I have this other program that is a good fit and will only cost you a tiny bit more in interest. He never mentions the fee schedule for this loan and you don't know to ask. When it comes time to sign your loan documents, the lender is nowhere to be found, the fees are double what you were originally quoted, the lender will not answer his phone, neither will his manager and you are faced with a nightmare decision to make. Either pay the undisclosed outrageous fees, or back out of the escrow within days of closing, possibly losing your good faith deposit, maybe the seller will extend the escrow a month so you can try to secure another loan? Never a good situation to be in.
- Protect yourself.
- Hire a great Realtor.
- Hire a great Lender.
- Demand a Loan Commitment Letter.
- If you don't get one - RUN!
- Go find your home with secured financing.
***Clients names are fictitious, but you know who you are.
Long Beach Home Seller Tips:
- Seller Tips - Choosing Your Long Beach Realtor
- Seller Tips - Preparing Your Long Beach Home For Sale
- Selling Your Long Beach California Home? Its A Whole New Game!
- E-MARKETING Getting "OUT OF THE BOX" to sell your Long Beach CA Real Estate!
Long Beach Home Buyer Tips:
- Home Buyer Tips - Don't Make Any Major Purchases
- Home Buyers Tips - Changing Jobs Affects Your Ability to Purchase a Home
- Home Buyer Tips - Things to Avoid Before Purchasing a Home
Home Loan Tips:
- Loving Your Home Loan
- How To Find Your Way Through The Home Loan Jungle - Part Two
- How To Find Your Way Through The Home Loan Jungle - Part One
- How To Get The Best Home Loan - Neatness Counts When You Want a Home Loan
| Laurie MannyLong Beach Realtor (562) 212-5420 |
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Main Street Realtors Belmont Heights 244 Redondo Avenue Long Beach California 90803 |
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· http://www.YourPropertyPros.comI hate when that happens Laurie, I guess some people don't appreciate our business, might as well not get any of it. So glad to hear that Bryan to the rescue again....very impressive.
Permalink May 18, 2007 23:43:27 · http://www.longbeachrealestatehome.comPermalink May 18, 2007 23:56:48 · http://thedenver.blogs.comBrian saves the day again! What would we do without him! And what would your people do without you! Perfect match.
kk
Permalink May 19, 2007 00:11:02 · http://www.blownmotgage.com/Laurie -
You are so right! A loan commitment or fully underwritten loan approval is imperative when shopping for a home in this day and age of shifting guidelines and changing parameters.
Brian was smart - he issued an approval, much different from a prequalification that so many get. A full approval from a direct lender is the only acceptable document in home purchase transactions.
I would also recommend to prime borrowers to request a copy of the lock. This will show the lock terms and determine if the loan officer has actually secured that rate for a time that will conincide with escrow closing.
Too many lenders like to play the "short lock" game where they will lock a loan for an unreasonably short period of time to make their rate sound better, only to spring the expiration of the lock half-way through the loan process.
I know Brian locks for plenty of time on his transactions and when I have a loan that is outside of my lending areas I will send it on down to America's Most Opinionated Mortgage Broker.
Permalink May 19, 2007 00:11:28 · http://www.longbeachrealestatehome.comPermalink May 19, 2007 01:10:11 · http://www.longbeachrealestatehome.comYou are absolutely right about the lock-in game, I have seen so many get hurt thinking they had the lock and it was never renewed. The thing about Brian is that I never have to worry about him, I KNOW he has our clients best interests in mind - all of the time.
Permalink May 19, 2007 01:13:20 · http://louisvillehomes4sale.comA solid team of professionals you can count on is very important regardless of your line of work. I hate to hear about the screwball that you encountered to start off with, but it's good you can call on Brian.
Permalink May 19, 2007 11:36:52 · http://beachcityrealestateinfo.blogspot.comHaving a lender like Brian on your team is a must.. In today's market having a strong REALTOR® and a great loan agent means so much to a buyer. They know they are getting a home they can afford and will enjoy for many years. Financial security for a homeowner is the top priority. John and Mary are very lucky they found you.
Permalink May 19, 2007 12:02:40 · http://www.azmortgageguru.comLaurie,
Man, sometimes being in the loan business can get a bit embarrassing when majority of the other folks don't do their job properly. Structuring the deal properly is a hall mark in my mind of a good mortgage professional. When you structure the package right, you know the pitfalls that might arise. This then enables you to get an approval on the loan.
The lock game, the bait and switch. It's crazy. My simple question to folks who do this is, would you want someone to do that to you? Your kids? Your mom/dad?
I'm glad Brian saved the day. It's guys like him who pull the industry up. Now if we can just figure out a way to get the dead weight out then we'd be in good shape!
Thanks for sharing!
Shailesh
Permalink May 19, 2007 13:40:15 · http://www.longbeachrealestatehome.comKaye, Don't know what I would do without Brian.
Shailesh, If more people thought like this, we would all be in better shape.
Permalink May 20, 2007 01:28:59 Laurie,
Great educational piece! Buyers need to know what they are getting into with so many unscrupulous lenders waiting to pounce on their prey. There are a lot of good lenders out there. You just have to know how to find them and what to look for.
Permalink June 08, 2007 19:22:27 · http://www.longbeachrealestatehome.comPermalink June 15, 2007 02:51:39This post has no comments awaiting moderation.
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