Or, How I Learned To Shop Around For A Loan And Saved Thousands of Dollars
Over the past several weeks, our articles have focused on many of the “consumer education” resources that are available to borrowers – both through the Consumer Financial Protection Bureau (CFPB) website and our own KnowBeforeYouOweNevada.com website.
As the CFPB prepares to roll out one of the most important recent changes to the mortgage loan process soon (TILA-RESPA on October 3, 2015), it seemed like a good time to review what we believe are the positive effects of new legislation and the role of the CFPB in the mortgage industry. Ready for a little Q&A? Great – let’s get started!
1. “Is the Dodd-Frank Act really a good thing for consumers?”
Definitely good. As we explained in greater detail in a previous article, one positive result for consumers is that it places a ‘cap’ on how much a Mortgage Broker can earn on your loan. It’s a fee that cannot be inflated – it is paid by the lender directly to the Mortgage Broker – and most importantly – it must be disclosed to the borrower. Basically, it places the control over the cost of the loan into the consumer’s hands (A good thing, right?). It’s important to note, however, that these same restrictions don’t apply to banks or mortgage bankers , who have no limits on the amount they can earn from your loan. So beware of those ‘invisible fees’ that they don’t have to tell you about – but end up costing you more in the long run.
2. “One mortgage lender is the same as another, right?”
Wrong! We mentioned above just one of the differences between types of lenders (banks, mortgage bankers, and mortgage brokers), and in a recent article we clarified those differences in detail. The short version is that a mortgage broker offers better value to consumers because:
• You only fill out one loan application – and they can shop numerous lenders on your behalf to find the lower rate and best loan program.
• There’s a limit to how much a mortgage broker can earn – not so with bank or mortgage bankers.
• Mortgage brokers are typically small, local companies with low operating overhead. That means less cost to you.
3. “Does every lender have to disclose how much they’re earning on my loan?”
Nope. Once again, the rules are different for mortgage brokers vs. banks and mortgage bankers. (Are you noticing a trend here?) Just like they say in the movies, “Follow the money.” One way to discover if a lender has ‘invisible charges’ in your loan is to compare the Loan Estimate sheet. (The CFPB has many helpful resources for consumers, including a form to help you compare your loan estimates in an apples-to-apples format, here.) Pay particular attention to the interest rate, the Loan Origination Fee, the Document Prep Fee, and the Document Fee. It can mean a savings to the consumer of literally thousands of dollars. (Not all lenders are the same!)
4. “How can I tell if a Builder or Seller incentive is a good deal?”
Compare the numbers. Often, those “credits towards closing costs” offers come with strings attached, as we explained in a recent post. And those strings can end up costing you more than you expect. You “have” to use their lender or title company to get that credit? Then you’re probably going to end up paying for it in higher interest rates or unnecessary fees. The best way to protect yourself financially is to contact more than one mortgage lender – then run the numbers.
5. “What should I do if my Realtor is encouraging me to contact only their lender?”
At the very least, question their allegiance. By law, it’s supposed to be to you – their client. But as we explain in our recent video about Marketing Services Agreements (MSAs), there’s usually a reason that a Real Estate Broker will strongly encourage you to use their lender – and it can often end up being at your expense. While even the CFPB is encouraging mortgage lenders to end the practice of MSAs, they’re still prevalent in the industry. Yet one more reason every consumer should shop with more than one lender to get the best mortgage.
To learn more about any of these topics, we encourage you to visit KnowBeforeYouOweNevada.com to find out which questions you should be asking your real estate professional and your mortgage lender. If they can’t compare – dollar-for-dollar – to Premier Mortgage Lending’s “No Fee Mortgage,” then we should talk about how we can save you money. Oodles of it.
Premier Mortgage Lending, NMLS #393282, is located at 701 N. Green Valley Pkwy., Suite 125, Henderson, 89074. The full-service lender is a member of the Las Vegas and Boulder City Chamber of Commerce, Better Business Bureau and Southern Nevada Home Builders Association, as well as an affiliate member of the Greater Las Vegas Association of Realtors.