What are the downsides of using a not-so reputed mortgage company who is offering a very good rate? What are?

Asked by Sean, 19044 Sat Jul 5, 2008

the things that can go wrong? Any thing that I should look out for?

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Eileen Musser ex realtor’s answer
Eileen Musser…, Home Owner, York, PA
Sun Jul 6, 2008
The others who answered here all have it right! There is just not that much flexibility in the market these days. If a lender seems out of line with other lenders you talk with, that is a great reason NOT TO USE THEM. Trust me, nobody loves you enough to give up their profits to save you a pile of money.

In over 10 years of experience I have only EVER had one out-of-area lender get the money to the settlement table at the time and date specified for settlement. When a buyer asks to use a lender that I do not know I relate the statistics above. The buyer is often sure that his lender is going to be the exception to the rule and ends up adding another stroke to the 'no money at settlement' column.

I have a lady right now who was supposed to close on her home at the end of June. The lender talked such a good game that he even convinced me that he could 'get er done.' Here we are almost a week into July and she is bunking in with her son, still waiting for the loan to get out of underwriting.

If you must go with a 'not so great' lender, get ready for a long bumpy ride, and plan where you and all your earthly goods will spend the time while you wait for the "clear to close." Maybe one of the GOOD lenders will be very generous and have your loan pre-approved and on stand-by. There is a pretty good chance that they will end up with your business, so it's worth asking.

Good luck!

Eileen's Green Team
3 votes
Jeanne Feeni…, Agent, Warren, NJ
Sat Jul 5, 2008
Hi Sean, particularly in this environment, go with a reputable firm - their preappoval will have real value to you in establishing your buying power and will be considered credibile by a seller in the bidding process. As with most things, if the rate is almost too good to be true, it probably is. As you evaluate your options, be sure you are comparing apples to apples. A very good rate may have underlying charges such as additional points that surprise you at the closing table and make that rate, well not so great. In addition to surprises, the greatest risk of all with a not-so reputable mortgage company is that they might let you down altogether. I've seen more than a couple deals collapse either at or days before close when the money wasn't there.

Get the most complete information you can on the product they are offering you and then go to several reputable firms - our in-house folks for instance have access to many,many programs and are very competitive - and allow them to respond. In the process you will likely learn much about questions to ask all lenders to be sure you are doing a sound comparison of your options.

Be careful my friend.

Jeannie Feenick
Weichert Realtors
Search and connect at http://www.feenick.com
Web Reference:  http://www.feenick.com
2 votes
Chris and St…, Agent, Philadelphia, PA
Sat Jul 5, 2008
There is a lot of risk in this cases. We had one recently where our buyer felt comfortable using "his guy" because the rate was good. We were okay with that but asked to see the good faith estimate a few weeks before closing. There were 3 points on the loan which added up to more than $5,000 thousand of closing costs !!!!! No wonder the rate sounded good. Fortunately, we had enough time to switch to someone we recommended where the rate ended up about the same, but without 3 points !

Hats off to The Somers who saved our buyer more than $5,000 dollars. If that is caught too late, such as the settlement table, there is not much that can be done.

Thus, I would be careful with the bait and switch per se. Just go with a reputable bank from the beginning or just listen to your buyers agents recommendations. Offering and receving, as someone else said, are two totally different items.

Good luck with your purchase !

For more helpful hints, please visit our website below:
Web Reference:  http://www.thesomersteam.com
1 vote
Michael Torr…, , Lansdale, PA
Sat Jul 5, 2008
All mortgage companies get their money from the same sources. Therefore, if the interest rate is much lower than that of their competitors, they are hiding fees somewhere. If they do not disclose them on the initial good faith estimate, you can be sure that they will pop up at the last possible moment when you need the money to close and just do not care, you just need to close. The comapnies I work with offer a double or triple the difference guarantee that if their charges are different at closing than the original good faith estimate, they will double-triple the difference. (see link below) If you would like a reference to a reputable lender with guarantees of service such as the above, let me know and I can put you in touch with them.
1 vote
Mim Heisey, , Shippensburg, PA
Sat Jul 5, 2008
A question for you. ??WHY would you choose a 'not-so reputed' broker?? Isn't that asking for trouble??

2 thumbs up to Jeanne's answer !!. Offering and delivering are 2 different things, and as Jeanne points out, you don't want to be suprised at the settlement table with several thousand dollars in extra fees.
Do be careful-- and wise!
1 vote
David, Home Buyer, Pennsylvania
Wed Jul 9, 2008
downside is that you can file for bankruptcy before you can say 'refinance'!

Seriously, if you want trouble, you can always find it, but I have seldom found people who ask about 'downside' when looking specifically for trouble, if you want trouble, you can have it.
0 votes
Dennis Stran…, Agent, Huntingdon Valley, PA
Mon Jul 7, 2008
I think i answered your other question about this mortgage co. Please use someone reputable! the rate might sound good but their may be ridiculous fees and you maybe paying points up front to buy the rate down. get a good faith est. and see what another lender can do for you.
I have seen 2nd rate mortgage co.'s mess things up in the past....a few years ago when the market was moving fast i had a client that used an outside Mortgage co. they were quoted a 5% on the first loan and a 6.5% on the 2nd. when they got to closing the rates were 8% & 10%, they were stuck and they bought the house with these insane rates.
I am not in the mortgage business. give me a call if you have any ?'s
Web Reference:  http://www.DennisStrange.com
0 votes
;, , Riverhead, NY
Sun Jul 6, 2008
Examine your good faith estimate VERRRRY carefully- as stated below, low rates are often made up in junk fees that can be astronomical. If they are of "ill repute", even that might not preclude fees snuck in at the last moment.
Web Reference:  http://optionsrealty.com
0 votes
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