I had a situation with a buyer in the past couple of weeks that had spoken to an internet lender they were not familiar with, to get preapproved to buy a home. This is not to say that all internet lenders are bad, however you must know who you are doing business with.
The buyer received a good faith estimate with an interest rate that was 1/2% higher than the going rate. And, the estimate had a $2895 mortgage broker fee attached to the loan! Ouch! There aren't many buyers in this market than can afford a fee like that tacked onto their loan.
I always recommend buyers talk to more than one lender to be sure they are being quoted the best rate and terms on their mortgage. I also recommend they talk to a local lender, as they work in and understand the Brevard County Real Estate Market.
So, I recommended to this buyer that she contact another couple of lenders, here locally that she could speak to about getting a mortgage. She did. The first lender she talked to is reputable and has been working for the same company for many years. He advised this buyer that her ratios were too high and he wouldn't be able to do the FHA loan for her at this time. He told her what she needed to do to fix her problem areas.
Both lenders were going to do FHA financing with 3.5% down!
She was completely confused as to why one lender told her it would be no problem to get an FHA loan and buy a house and the other lender told her that she needed to get some items on her credit in order, before she could proceed ahead. Well, I explained to her that it would be the difference between whether she would actually be getting to the closing and actuallly buying the house.
One lender is going to tell you upfront there's no problems. He will collect upfront fees, the buyer will pay for inspections, credit report, appraisal, etc. only to find out that halfway through the transaction her ratios are not in line with FHA guidelines. So, then she will be denied, after she has spent a good bit of money.
The other lender played it straight from the hip. He told her right upfront, that there are things that must be addressed before she can purchase a home. He told her today she cannot qualify for an FHA loan. This lender will save all parties involved from signing a contract to purchase with a seller, paying exorbinant fees, and wasting everyone's time.
Basically, the third lender she spoke with gave her the same info that the second one did. She would not qualify today to purchase a home today, until she cleared up a couple of issues.
Give me the lender that's going to tell me today that it's just not going to work out for the buyer right now.
And, stay away from the shady internet scammers that are still making their monies off of upfront application fees.
She has decided to address her issues immediately, and hopefully will be back in the market, after talking to a local lender, within the next 6 months.
This article is authored by
Sandy Shores Realtor, Melbourne FL Real Estate
that for you
Unfortunately too many buyers are too impatient and just want to jump in, which is one of the reasons the sub-prime industry ran amuck. When properly presented, the smart buyers will do what needs to be done and end up better for it.
Hi Sandy
Very timely post, there are unprofessional lenders who do work off the upfront fees, as professionals we need to direct the customers to professional lenders.
Good luck and success.
Lou Ludwig
Hi Sandy, It's always a good idea to visit with a few lenders unless the buyer already has a trusted lender or mortgage broker they have worked with before. Your advice will save them a lot of money and time in the long run.
Not only did you recommend a quality mortgage lender but you also reinforce the quality of your own business by doing so. You would have looked bad in the eyes of the other agent whose home you wrote an offer on because you didn't know who the internet lender was or their credentials.
Sandy-It is our job to protect our clients from lenders who hand out approvals like candy. The ones who tell the truth may have a bitter pill to swallow but they will keep money in the buyers pocket until he wants to use it to really buy a home!! Great post and very well said!!
It is so much nicer to simply work with someone you know or were referred to. The internet can be a really shady place to do business espcially if you can't actually meet with them in person.
Sandy, you are right to recommend multiple lenders. I have seen three different lenders give options on three completely different programs even one saying they weren't qualified. The Internet lenders can be excellent and beat the local lenders and it is a myth that they are all bad. Some of my best deals came from the Internet lenders but also some of the best ones came from local lenders. I have learned not to prejudge ANYONE.
Hi Sandy,
The Internet is good for many things..... Unfortunately, loans are not usually one of those..
Great post!
Ann
Sandy, I wish we had a lot more straight shooters. A couple of years ago the mortgage industry was full of pirates. Today, the people who are in the mortgage industry are a lot more professional. Kudos to them!
Ed, True, buyers must be patient and do their homework upfront. And it's our job to help them do that.
Lou, We have experienced many lenders that work off of upfront fees, strictly, on buyers that cannot qualify.
Miss Mary, I think it's a good idea to talk to a couple of different lenders to get a clear picture.
Evelyn, We must be sure that the lenders are doing a bonafide preapproval.
Hey Caren, I don't want my buyers to be suckered out of any of their hard earned money.
Rob, I think that we must just be very careful.
Gary, So true. We must make sure to do our homework, upfront, before we get out with that buyer.
Ann, We must remain cautious on who we are choosing to do business with.
Paul, I love the straight shooters in the industry.
I've run into this a couple times. Can be very frustrating. While I'm sure that there are good quality online lenders but I'm still a firm believer in getting financed from a local company.
Justin, There are good interent lenders avaialble today, however, I believe that buyers should shop around to different lenders and get the best rate.
It saves so much unnecessary stress and aggravation, not to mention money, when the lenders are straight with the buyer. Deals go a lot smoother, feathers stay unruffled (for the most part), and everyone walks away happy when the deal is finally done. Those are the best lenders to work with! Shady characters never help anyone but themselves in the end.
Kathy
Hi Kathy, So true, straight shooters in the beginning make everyone's life so much easier.