ISN’T THAT EASY
Everyone wants the “best deal” they can get when acquiring a
home mortgage. In spite of new disclosure requirements loan applicants remain
concerned that some lenders are charging excessive settlement fees and are advised
to negotiate all fees as well as the interest rate.
Unfortunately, negotiating fees only works if you were being
overcharged initially. Consumers are often surprised at the cost of acquiring
financing. Thus, it is easy to presume that one may be being disadvantaged.
But, for those lenders who quote realistic fees, there is no room for
When one first enters the loan process, lenders are
typically reduced to rendering an estimate of anticipated costs. The mandated Loan
Estimate (LE) form has in some ways exacerbated the difficulty of borrowers
understanding the fees being charged in a loan transaction. Most borrowers will
find it easier to understand the one page format describing fees that most
experienced lenders provide.
are now required to provide what they believe will be a “worst case” scenario
when doing the original estimate. The new rules hold the lender responsible for
any fees undisclosed in the original LE. For that reason, some lenders include some
estimated costs for items like pest control reports, home and roof inspections
and others that will unlikely be charged but they feel need to be included
“just in case”. While some fees are likely to change (i.e.; the interest amount
based on the actual day the transaction closes escrow), many fees are basic and
should have minimal, if any, adjustment to them when you see them on your final
Closing Disclosure (CD).
When someone tells you that they were successful in
negotiating a reduction of hundreds of dollars in fees, most likely they were
being overcharged in the first place. Why would one continue to do business
with someone who, at the very least, tried to scam you?
There is another way that borrowers can be disadvantaged,
especially by internet lenders. The phrase one is likely to hear when talking
with an internet lender is “our fees are only” and the number is
typically lower than any obtained locally. The operable word is “our”. The fee quote
usually does not include the non-broker fees like escrow, title, recordation,
interest pro-rations, etc. Too often it is only when you are ready to sign loan
documents you discover that you were not provided all of the fees by that
A reputable lender/broker should provide you a list of all
the fees you are likely to see on your closing statement at the conclusion of
your loan transaction. Ask the question, “are there any fees not included in your estimate that I
might see at closing?”
One quick comment regarding interest
rates. There is virtually no room today for negotiating interest rates.
These are established by the secondary market investors, principally Fannie Mae
and Freddie Mac, and all lenders have to work with the same rates. Finally, the
“float down” privilege, wherein one locks a loan rate
and then is able to float down to a lower rate if the market adjusts, is with
rare exception unavailable. It is very unlikely that a lender who tells you
that you can lock and s/he will get you a lower rate will most likely have to
change lenders mid-stream in order to accomplish that fact.
Finally, you must trust your instincts or as the phrase goes
“trust your gut”! Who asked you questions and did the counseling advising you what
might be your best loan option? Who was willing to take the time to explain all
the loan details? Who anticipated what you needed to know to make a good loan
decision? And when you’ve found that person, stop shopping rates and terms and
stay loyal. You’ll be glad you did!