What happened? You got an "estimate" of your closing costs to close on your new home. You go through all the motions of obtaining financing. You get to the closing table or maybe you were lucky enough to know a day ahead that you don't have enough money to close the transaction. Has this happened to you? What do you do? Many times borrowers are faced with the dilemma of where to find the money at the last minute. The most recent person to call us was $1500.00 short and we were not involved in the transaction! In 33 years in the mortgage business we've learned that there are others in the industry that are not as professional as they appear to the unknowing consumer.
An estimate is just that...an "estimate". In today's society we've all learned to look for bargains. When you are looking for a contractor to work for you, you will most likely want the lowest estimate. The low man usually gets the job. Consumers look for the same in financing. You "shop" for your mortgage gathering three or more estimates. How do you choose which mortgage company you are going to use?
Here's the problem...Consumers are often led astray by understated Good Faith Estimates and the fees change at a later time to something more objectionable.
It is our experience that if a loan officer or mortgage broker has been in the business for any length of time, he should know how to "estimate" the expenses associated to closing on the home.Where Estimates are Understated:
1. Taxes & Homeowner's Insurance - To accurately disclose he should know a little more about the property such as what the real estate taxes and the homeowner's insurance costs are. We do the homework on the property before we release an estimate. In Florida, we will often OVER estimate the homeowner's insurance for a worse case scenario. The buyer sometimes will find his insurance at a more reasonable cost and his expenses are lowered.
2. Escrow Accounts - If a professional has closed enough loans, he knows how many months of taxes and insurance need to go on the estimate!
3. Additional junk fees or higher fees than anticipated. This area seems to have the most abuse in underestimating. The loan discount fee, loan origination fee and mortgage broker fee should not change without the borrower's knowledge. If the loan amount has changed or the borrower chooses to pay an additional discount fee to lower his interest rate, a new estimate should be delivered and signed by the borrower to acknowledge the change. This procedure is required by HUD and federal law (RESPA)!
Why did your mortgage professional underestimate your costs? Simple! He either is new to the industry and just "didn't know" OR he just wanted the job. A poor salesman will tell you what you want to hear and worry about the consequences later. You won't know until the end. What will you do? Walk away from the table or fork over the additional funds? Neither is fair!
Make sure you are not the next victim of Bait and Switch. Better call JoAnn Young - People's First Financial Services, Melbourne, FL 321-243-4917
Posted by JoAnn Young
