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Beware of mortgage refinance ripoffs

This is a great thing for you home owners, potentially saving hundreds of dollars a month on your house payment. But it is also a time to be wary of the unscrupulous lenders and brokers who will take advantage of you and rip you off.

Here are a few things to be aware of and to avoid.

Lender Fees -Mortgage Lenders deserve to make a living, and they should make a profit on your new loan, but they should not take advantage and make outrageous profits. There are two types of fees that Lenders charge, vendor feees and internal fees

Vendor fees – fees paid to vendors for their services Vendor fees. These are usually low ($50 or less), and are not negotiable. These include

Internal fees – fees charged by the Lender for services they provide. These are ’junk’ fees, charges for things the Lender has to do anyway, and they can run to several hundred dollars each. They include:

Just because it says “processing fee” or “underwriting fee” or “administration fee” does not mean you have to pay it. Ask the Lender to pay these for you, or ask to have them removed completely. I wouldn’t pay them, and neither should you

Most loans will include “discount points” or a “loan origination fee”. These are both the same thing – a percentage of the new loan amount charged to you (usually 1% or less). These are completely negotiable. I usually will give the Borrower (that’s you) a list of rate/fee options - rates and the point/origination fee associated with each. The higher the interest rate, the lower the fee should be. In fact, higher rates should have the lender paying some or all of your closing costs for you. DO NOT PAY MORE THAN 1% OF THE LOAN AMOUNT as points or loan origination unless you thoroughly understand what you are doing! Anything more than that and you are probably being ripped off.

Title insurance is required for any new loan, the amounts are set by the state, and they vary greatly from state to state. There is nothing you can do about this charge, so just grin and bear it. BUT, some states offer discounts of up to 40% on a new loan, depending on when the last loan on that property was done. Ask your title company about any potential discount (some sleazy will lie and charge you more than they should, so do your homework on this.

YOU CAN SELECT ANY TITLE COMPANY YOU WANT FOR YOUR REFINANCE. Title fees vary from title company to title company – call several and ask about their fees. They all provide essentially the same service, so find one that does gouge you with extraneous fees. Do not let anyone force you to use a title company if you wan to use another.

Mortgage Brokers are businessmen who shop your loan to several Lenders to find you a good deal. At least, legitimate brokers are looking to get you a good deal. As with any business, there are sleaze balls and charlatans who are out to get as much or your money they can. Brokers will charge you a fee for their services, as they should. This fee should not exceed $1000 dollars, and will usually be less than that. Some Brokers will waive their fees if you ask. They can do this because they will also be paid by the Lender, called a yield spread premium. For example, if the rate you are quoted by the Broker has a 1% loan origination fee or 1 discount point, the Lender may be charging less than that. The difference between what the Lender charges for a rate and what you pay for that rate is paid to the Broker after the loan closes. You never know this has occurred. MAKE SURE YOU ASK QUESTIONS!

The government always gets their share, so expect to pay filing fees, title endorsements, and some taxes. BE SURE YOU ARE PAYING LEGITIMATE STATE FEES and are not lining to pocket of a title company owner with made-up charges

TOTAL CLOSING COSTS SHOULD NOT EXCEED 2%-3% OF THE NEW LOAN AMOUNT. Lenders and Brokers are required by law to provide you with a Good Faith Estimate that shows ALL the charges and fees being applied to your loan. GO OVER THIS IS DETAIL WITH YOUR LOAN OFFICER AND MAKE SURE YOU UNDERSTAND EVERYTHING ON IT.

It is up to you to understand what you are getting into with a mortgage. Ask all the questions you can think of. The only stupid question is the one you don’t ask, so do not worry about looking stupid. THIS IS YOUR MONEY, YOUR HOME AND YOUR RESPONSIBILITY TO GET IT RIGHT.

If you do not understand something or feel pressured, WALK AWAY. Be a smart consumer. If you get ripped off, you only have yourself to blame

If I can help you in any way or answer any question you may have about any aspect of the mortgage process, contact me. If I know the answer, I will tell you. If I do not know the answer, I will find out and tell you