Shopping Strategies When It Comes to Selecting a Mortgage Lender
A Home Buying Article Contributed by Robert Scalia
Get You Shopping Strategy down Pat When It Comes to Selecting a Mortgage Lender
When it comes to selecting the right mortgage lender for you, one of the most common mistakes shoppers make is to select a mortgage lender without knowing any of the lender charges except points.
What they will often do is try to negotiate the charges before they have received a Good Faith Estimate (GFE), which itemizes all the settlement costs including all lender charges. This isn't the best way to do things. Not in the least.
What is the Best Way to Approach Your Mortgage Lender?
Well, for starters, challenging individual cost items is not an effective way to control mortgage lender fees. That's because the typical borrower has little to no factual basis for challenging any particular cost item.
And even in those rare cases where borrowers do know their closing costs inside out and can plead their case effectively, they have to keep in mind that their bargaining power is actually pretty weak. the mortgage lender knows they have gone through all the trouble to trust him or her and are not prepared to walk away from the deal over a few costs that are probably more of a nuissance or a matter of principal than anything else.
The mortgage lender knows this very well
And even in those rare cases where a determined borrower succeeds in bludgeoning the mortgage lender into making a change, you can almost always be sure that the lender will turn around and make back that money somewhere else. Keep in mind that the costs shown on the GFE are "estimates", and can be different at closing than they were the day before closing. You as a borrower will never win this game.
Smarter shoppers can therefore adopt a different strategy. What really matters in the ed is not individual costs but the total settlement costs. So smart borrowers will therefore select a mortgage lender on that basis. Instead of shopping lender fees, they shop total settlement costs.
How Can This Strategy Get the Mortgage Lender Working for You?
When it comes to selecting a mortgage lender, this very process has become the foundation of new rules regarding settlement costs proposed by HUD. Under these new rules, borrowers like yourself would be able to obtain one binding price covering all settlement costs.
Until this happens, it's difficult to use this strategy because lenders will simply not commit to any figures on total settlement costs. Mortgage lenders today have complete knowledge and control only over their own charges and are not about to try and estimate how much they have to pay out to third parties.
Since lenders that ae being approached for their total settlement costs have an incentive to give a lower estimate, the truth of the matter is that they will be more than willing to exaggerate in order to garner your business. In some cases, you as a borrow just have to be prepared to take some of these costs in stride when settlement time comes.
