Why Lenders Are Not Your Friends - Part 1

Copyright ฉ 2006 Ed Bagley



The next time you go borrowing, and your friendly banker smiles as you walk into his office, be aware that you may be snookered by someone not worthy of your trust. If your banker is an attractive woman, then you are even more susceptible.



I have grown over the years to appreciate a certain breed of bankers as one of the lower life forms that inhabit planet Earth. What I am about to share with you is even more true of certain mortgage brokers, secondary lenders and financial predators.



They operate as sleazy parasites under the guise of helping the least credit worthy consumers who have virtually no savvy in financial matters.



Rather than pick on the worst of this collection of lenders who will help relieve you of your money without any conscience, I have targeted bankers. Before the banking industry was deregulated there were many people who considered bankers worthy of some trust and admiration. Those days are over.



Bankers still enjoy the best reputation (such as it is) among these lenders, but they have no problem patting you on the shoulder while picking your pocket and telling you how much they have helped you.



I do not intend to indict the entire lending industry, just 95% of it. Here is an example:



My 24-year-old son wanted to refinance his first mortgage and was about to go to a leading lender in the market to look at its loan proposal. I decided to tag along because I know how lenders operate, especially when dealing with younger clients and senior citizens who have not handled the finances in their family.



His present loan had a principal balance of $123,773 with 7.458% interest at a 30-year fixed rate.



The proposed re-fi was for $134,999 with 9.9% interest (10.28% APR) at a 30-year fixed rate. The re-fi would cover the $123,773 principal balance due and provide a $10,409 home equity loan. The lender was actually smiling when he outlined what a good deal this was for my son.



I had coached my son to simply listen to the proposal, commit to nothing, take the paperwork with him, and tell the lender he would study the proposal and let the lender know if he wanted to proceed.



Once away from this flytrap I took my son to lunch, and we discussed the great deal he was given.



First, I had him look at the 3% discount fee on the Good Faith Estimate of the closing costs. (The discount fee is the amount you are paying for the privilege of getting the loan.) The discount fee was listed at $312.



What the lender was not telling him was that the 3% discount fee was figured on the $10,409 home equity loan and not on the $134,999 for the total loan which was $4,050, a slight difference of $3,748 in their favor.



If you called the lender on this discrepancy, he would probably say, "Oh, you're right, that's a mistake.



That's the figure for the home equity loan. Jeez, I'm sorry."



When the day comes to close the loan, you see the bloated figure and object, and then the lender multiplies the $134,999 loan times 3% and viola, it comes up correct. You are dazed and confused, feel under pressure, want to get this over with and sign on the dotted line. This happens every working day in America when loans are closed.



Long after you are gone, the lender is quietly snickering, counting up the additional funds he will earn, and welcoming the next dumb bunny who comes through the door while you will be stuck with making payments for 360 months on a lousy loan.



For the uninitiated, there are more real surprises at loan closings in America than when opening gifts on Christmas morning. One client of mine went to a loan closing and learned that $10,000 had been added to the loan closing costs without prior notice; he thankfully got up and left.



Always remember that for every liability you have, you are someone else's asset. For every liability-such as a mortgage, credit card, car loan or school loan-you are an employee of the company lending the money.



If you take out a 30-year mortgage loan, you have become a 30-year employee of the company which lends you the money. This is a very sobering thought when you are paying attention, as you should be. I am not talking about anything important in this article, just your financial health.



Part 2 of this article will take the financial details of the loan apart and show how not taking the loan will save my son $157,495.

Using The Web For Mortgage Leads

ÂOne of the most useful tools when looking for mortgage leads is the Internet. Instead of having to take the time to call financial institutions to inquire about their current offerings, you simply use the search engines that are on the web. Finding mortgage leads on the web will save you a great deal of time and put more information in front of you than simply making phone calls one at a time will do. Searching for mortgage leads on the web can make the difference between being able to afford the home of your dreams and having to give it up.



 Many websites, in addition to publishing their current interest rates, also have a payment calculator for the borrower's convenience. With this handy tool, you can get an idea how much your mortgage payments will be on the home you are considering, and thus know if you need to find something less expensive or wait until you have more money for a down payment. Another way using mortgage leads on the web can save you time is that you can apply for pre-approval before you even find the home you want.



 Of course, some companies offer this when you apply in person as well, but on the web, you don't have to go into the lender's office, you just apply online, receive an approval for a specified amount, and then find a home that fits into that amount. The pre-approval is usually good for at least six months, after which you have to resubmit your application.

Florida Mortgages

With lending rates very low, this is a good time to consider buying a home. As with any major investment, you can get the most out of a mortgage by understanding the lending market and terms used in this market. With a little effort now, you could save yourself thousands of dollars in mortgage payments over the years. Before searching for a lender, there are some general tips on mortgages you may want to consider.

Your first question is probably, how much can you afford to borrow? Lenders use a general rule of thumb that your monthly mortgage payment should not exceed 29% of your monthly gross income, before taxes or any other deductions are made.



Once you know what this figure is, you can shortlist neighborhoods with affordable houses. The next step is to get and compare mortgage rates from several lenders. This is always worth doing because lending rates vary greatly and shopping around can get you a better deal. You can also go through a mortgage broker who can help you find a lender. Ask the broker what fee is charged for the services you're considering.

For peace of mind, try to find a reputable lender.



This could be your financial institution, a mortgage company, or a government lender if you are eligible. When you get a rate quote from a lender, find out whether it is a fixed or adjustable rate, and if adjustable, whether it will be reduced if interest rates fall. Also ask about the annual percentage rate (APR), which factors in other costs like a broker's fee or points. Ask your broker or lender to carefully explain all fees involved. Other questions to ask are what the down payment is and whether private mortgage insurance is required.



Florida Mortgages provides detailed information about Florida mortgages, Florida interest only mortgages, Florida mortgage brokers and more. Florida Mortgages is affiliated with Florida Refinance Mortgage Loans.

How to Get Approved For a Mortgage Loan Modification - Learn to Pre-Qualify Yourself

Do you apperceive how to access your affairs of accepting accustomed for a mortgage accommodation modification? One way is to apprentice how to pre-qualify yourself so that you knowyou can meetyour lenders approval guidelines. This is a simple action that you can use to apperceive advanced of timewhether you accept a adequate adventitious of success at accepting the accommodation conditioning you need. The Obama accommodation modification plan has austere guidelines for qualifying, as do abounding added accommodation conditioning plans.



Here is some admired advice you can use to apprentice how to pre-qualify yourself so you can adapt your appliance accurately and get a jump alpha on the process.



Successful mortgage accommodation modification candidates will be able to accommodated assertive approval guidelines. Once you apperceive what those guidelines are, you can plan on your appliance at your own clip to actuate if you ability qualify. You charge to apperceive the affairs debt arrangement guideline, again compute your own so that it will accommodated that guideline.



You can acclimatize some of your costs if needed, or even add some domiciliary assets with a acquaintance or allotment time plan if necessary. The ambition is to apperceive what needs to be anchored to accommodated the debt arrangement guideline, again accomplish those adjustments afore your lender has the adventitious to about-face you down. When you plan on this advanced of time, afore you acquaintance your bank, you accept the adventitious to accomplish the all-important changes to your paperwork.



That way, you can provideacceptable accommodation modification forms to the coffer and access your adventitious of approval.



The Obama mortgage accommodation modification plan offers a additional adventitious for millions of homeowners larboard with few options to save their homes. $75 billion dollars has been set abreast to advice able borrowers get a lower absorption rate-as low as 2%-so they can allow to break in their home. Not anybody will authorize for this accommodation workout, and alone borrowers who can authenticate that they accommodated the approval requirements will be approved.



You do not wish to absence out on this opportunity-make abiding you do aggregate you can to get the advice you need.



The Obama mortgage accommodation modification plan has an added incentive-successful borrowers will be paid for every ages they abide accepted on their new adapted loan. $1000 a year, up to $5000 total, will be accustomed appear the arch antithesis of loans that accommodating homeowners accumulate current. That is addition benefit advised to animate borrowers to administer for a mortgage accommodation modification and to break committed to home ownership.



The Treasury Department is auspicious all absorbed homeowners to activate acquisition the appropriate abstracts and alpha the appliance process. The Obama mortgage accommodation modification plan is chargeless for borrowers, and lenders are accepted to be inundated with requests. Accomplish abiding you apperceive how the plan works, pre-qualify yourself, again abide an authentic and adequate accommodation modification appliance to your lender.