Survival Guide to Turbulent Mortgage Times

With bank underwriting guidelines changing everyday across the country and across all credit types, mortgage providers (brokers, small mortgage banks, etc.) will have an extremely difficult time providing quality customer service and concrete answers to their customers about the type of loans available to them and the rate at which those loans are offered.

Some companies will leverage these circumstances to take advantage of people – blaming bait-and-switch tactics on the fluidity of the market. Some companies will be accused of bait-and-switch while acting in good faith. It will be difficult to tell who is doing what.

Here is my Survival Guide for the next several weeks if you are a consumer:

1. Work with a company that doesn’t charge a "lock" or "commitment" fee. This way once you are quoted an interest rate and a program you can have them "lock" the loan at the discussed interest rate that day free of charge. Once you’ve been informed your loan is locked, obtain a copy of the interest rate lock from the company to ensure your loan is locked as discussed. This doesn’t obligate you to working with them and gives you security in a "locked-in" program, even if you continue to shop and explore your options – which I highly encourage.

2. Get items in writing. Get copies of your approval, lock and doc order request forms, as well as a copy of the Final HUD-1 Settlement statement prior to funding. These are the key documents that track the progress of your loan on the bank’s side. You’ll be able to confirm your rate, loan amount and program type stays as agreed on all documents.

3. Know who your loan is being sold to. Ask the bank’s name. Look that bank up in the news. If there are questions about the bank’s solvency or ability to deliver on the loan based on the news you read ask for your loan to be qualified at another bank as well as a back-up offer in case there are problems with your first approval.

4. Speaking of back-up offers, they are always a good thing. Submitting a loan application should be free (I highly urge you to not work with a company that charges up-front fees such as a lock/commitment fee or application fee) and you should use that to your advantage. When you shop for a big-screen TV you probably check Best Buy, Walmart, Costco and Circuit City (maybe more). You should take the same approach to your mortgage. Submit your application to two companies, get copies of both approvals and Good Faith Estimates. Make your decision on which loan you want at that point.

Next, I’ll have my survival guide if you are in the business.