What to Avoid When Choosing a Mortgage Company

Searching for a mortgage company can be overwhelming. With the countless numbers of companies offering mortgages, choosing the most appropriate one can put you at a loss. To make things easier for you, here is a list of the things that you should avoid.

1. Out-of-state lenders

Doing business with an out-of-state mortgage company can be a disadvantageous move for you. If you are not thoroughly familiar with a state’s fees, you are more liable to get wrong estimates. However, when you stick with a local mortgage company, you will be in better hands. A local mortgage company has access to local contacts, like high quality appraisers and title companies across the state. It can also help provide precise values using its knowledge of the area.

2. A real estate company pressuring you into using its lender

Some mortgage lenders are connected with realtors. As a result, realtors are usually pressured by these mortgage lenders for additional business. You should be aware that you have other options aside from the lender your real estate company is pushing. Besides, realtors could charge a single fee for everything you need to purchase a house. If you’re a homebuyer dealing with realtors, you are at a big disadvantage. The lower percentage of repeat business for real estate professionals is one of the major reasons they have little incentive to treat their clients fairly.

3. Estimate on closing costs without a maximum fee guarantee

Do not accept a closing cost estimate in the absence of a maximum fee assurance. A legitimate mortgage company should be able to provide a Good Faith Estimate (GFE) and stick to it. The Real Estate Settlement and Procedures Act (RESPA) states that a mortgage company should provide a GFE. But since these are estimates, actual charges may be more or less. And since a mortgage company is not bound to the GFE stipulation, it is legal for the company to add or change fees, which come in the form of “hidden fees.” Borrowers are typically subjected to these changes in fees at closing. To avoid this, you should be aware of all of the necessary fees you will incur.

4. A mortgage company that underestimates prepaids and title insurance charges

Prepaids (interest per diem and tax escrows) and title insurance fees are set by the state. Thus, it is illegal for title companies to provide discounts except for the regular 3 discounts they are all required to provide, which are new developments, 7 year reissue, and 3 year reissue. When a mortgage company quotes a title premium lower than what the state chart requires, it is giving you an insignificant estimate.

5. Pricey application and appraisal fees

Don’t be fooled by a mortgage company that requires steep application and appraisal charges. You should be vigilant to be able to distinguish companies that are not after your best interests. You will want a mortgage company that does not take advantage of homebuyers. Besides, just because a mortgage company charges a lot does not mean that it can provide first-rate service. The most precise reputation of a mortgage company is service.

Choosing the best mortgage company for you does not have to be a daunting task as long as you remember to keep costs in mind. By being attentive and vigilant, you won’t fall prey to the numerous dishonest companies that abound the industry.