Mortgage Lending and Identity Theft: What You Should Know

When you apply for a mortgage these days, lending institutions gather enough information on you to form an independent DNA sample (not really, but you get the picture). What steps should these organizations take to protect you from identity theft?

If you’ve ever applied for a mortgage, particularly since credit guidelines have tightened in the past few months, you know that the amount of information you must divulge to your lender could sink you financially if it were to get into the wrong hands. That’s really kind of scary when you ponder it a bit. I mean, after all, they have your social security number, your birth date, your bank account numbers, and a hair sample (just kidding on the last one). But, really. How do you know that you’re protected?

The Gramm-Leach-Bliley (GLB) Act requires companies defined under the law as “financial institutions” to ensure confidentiality and security of your personal information. Which includes mortgage lenders. In addition as part of this act, the Federal Trade Commission (FTC) issued the Safeguards Rule, which mandates measures to keep customer information safe.

So, if you apply for a mortgage and you’re concerned, your lender should be able to provide you with a written security plan that describes their program to protect you. The plan’s appropriateness should vary in relation to the company’s size and complexity, and the nature and scope of its activities. You wouldn’t expect a company with 20 employees to have the same guidelines as a company with 2000 employees. But there will be some similarities.

The written plan should outline that all staff be trained and informed of the policies. That’s important. How good is a plan if no one knows how to implement it? Typically, a lender should have several methods to detect identity theft apart from suspicious documentation or squirrelly applicants. Most use third party sources to verify a customer’s identity beyond driver’s license or government issued identification. These are background search programs with weird names like Lexis Nexus and Interthinx. And they work.

The company’s policy should require employees to change their various passwords regularly and have good security systems in place to prevent “hackers” from accessing your information. We hear time and time again the horror stories of hackers and their nasty activities. Furthermore, the company should shred documents and lock away files at night. Who wants their W-2 showing up in a company’s dumpster? Who wants the nosy cleaning crew thumbing through their file? Not me. Not anyone.

Furthermore, the staff needs to be educated as to how to detect fraudulent documentation or suspicious activity. And they need to understand they shouldn’t discuss your information with any other employees that don’t need access to your file, nor should they discuss your profile with the spousal unit at home. It’s kind of like being a doctor. They can’t discuss patient’s medical records. A lender can’t discuss your financial records.

And what happens if a lender suspects a borrower has been the victim of, or even creepier, is committing identity theft? The lender should have clear guidelines as to how the individual discovering the discrepancy should handle the “red flag.” After all, when the red flag arises, how does the lender know if she’s talking to a victim or a perpetrator at the time of discovery? So, it has to be handled correctly. And the lender’s employees need to have a clear understanding as to exactly how to handle these situations.

So, when you apply for a loan, find out upfront if you’re being protected properly. You’ve got enough to contend with these days when obtaining a mortgage. You deserve a lender who complies with these regulations and acts. We all deserve this protection.


Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at http://www.kristinmortgage.com/ Home Loans Plain Talk.

Eeny, Meeny, Miny, Moe? Which Lender Do You Choose?

You’re ready to buy a house, and you’ve spoken with 3 different lenders. All of their offers seem comparable. How do you choose just one?

Ok, so you don’t have a particular relationship with any one lender, and you need to get a home loan. Being the prudent shopper that you are, you’ve called around to various lenders, and you’ve obtained 3 very competitive good faith estimates. In fact, these estimates are so competitive, you wonder if the three lenders are in cahoots with each other. (Trust me, they’re not). So, how do you decide?

First, you should consider the reputations of the companies involved. You can check out the company/lender online. How long have they been in business? In today’s volatile market, you want to make sure that whom ever you are obtaining your loan through is in business on the day of closing. When times are tough, mortgage shops have been known to close their doors overnight. Don’t laugh, it happens. Even a good lender may close its door if it is relatively new or poorly managed. Look at the sub prime market. When the bottom fell out of it last year, lenders disappeared right before our very eyes. Ok, I’m exaggerating a bit, but many consumers found themselves shopping for new mortgage at the last minute. And those that were unable to produce one probably lost a bit of cash, not to mention experienced a lot of turmoil and stress. After all, many plans are made by many different people when a home changes hands. Movers are booked, rent is cancelled, new school enrollment is arranged. It can become a logistical nightmare if a closing date is moved.

Secondly, one lender may be able to offer you something another cannot. I’m not talking about anything directly related to the lender’s fees or charges. But some lenders offer discounts or services from other vendors. It can be anything from a coupon for a free appraisal to a gift certificate to Home Depot. Ask your lender if there are any other benefits or advantages to using them. You never know.

A third thing to consider is service. Has one lender been more responsive than the others? Do you get the feeling that one will get the job done over another? A person can have a completely different experience with the exact same loan from one lender to a next. Why is this possible? Because once your loan is out of your lenders hands, it flows through different departments. Many, many people will work on your loan before it is all over. It takes a village to close a loan (not really, but it was fun to say). Seriously, though. A good support staff is what keeps a loan officer on top of the pack. So, take into account a lender’s reputation. A good one is earned for good reason.

And finally, is there a lender you just click with over the rest? Sometimes, it’s a question of personality fit. I’ve heard from countless customers that this aspect is what tipped the scales for them. And it makes sense, when you think about it. After all, if you’re making the biggest purchase of your existence, you really want to work with a person with whom you feel comfortable. Trust me, even seasoned homeowners have questions and misgivings. Thus, the answer of whom you choose may just come down to who you like.

Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.

Testimony - My customers are extremely important to me, and I am here to prove it

“Kristin was able to provide the dedication and information that I needed to purchase my first home. Without her wealth of knowledge and experience I would have never been able to get away from the money pit that calls it self “rent!” Thanks Kristin!”

~Travis G. / University of Tennessee


“Your home is your most important investment. For many people, it’s the largest debt that you’ll ever personally incur. And, your home is where you will raise your family and create your own secure haven. These are two compelling reasons why you should take the greatest of care and consideration when choosing a mortgage specialist. I will take all the time and energy necessary to ensure you have the best options before you when making the important decisions that affect your largest and most important investment. Let my experience and years in the industry work for you. My customers are extremely important to me, and I am here to prove it.” - Kristin Abouelata Mortgage Specialist

Home Loans: Should Tom, Dick and Harry Pull Your Credit?

There’s much confusion these days about how often or when you should allow your credit to be pulled. Here’s a little background info on when it’s ok to say yes….



The fact of the matter is that today when you are investigating home financing, the big question on everyone’s lips is, “What’s your credit score?” Many people are clueless as to what their credit score is. Pricing and product availability are hugely driven by credit scores in the mortgage industry. The difference between a 620 credit score and a 720 score means a world of difference to your wallet. However, when it comes to lending money for a home loan, there is a point when a lender must make a credit inquiry.

What is a credit inquiry? It’s when a lender or another entity you are asking to extend you credit requests a tri-merge credit reporting agency to assess and report your credit scores. At the back of the report, there is a list of what organizations you have given permission (or not) to pull your credit recently. And, too many credit inquiries can affect your credit score negatively. However, not all inquiries will do so, just ones that are a result of you applying for new credit. For example, if you apply for a mortgage, car loan or credit card, these are the types of inquiries, when you agree to them, which can affect your FICO credit score. The term FICO stands for Fair Isaac & Co. Credit, the entity that developed this scoring method for determining if you’ll actually repay your debt. However, some inquiries don’t affect your FICO credit score, like a future employer doing a background check on your credit.

So, if you want to apply for a mortgage, and compare different lenders, are you asking for trouble by allowing every Tom, Dick and Harry to pull your credit (or Tammy, Diane and Helen for that matter)? Well, yes and no. It depends. The scoring engine will typically ignore all mortgage or auto inquiries made in the 30 days prior to your most recent scoring. So, you need to make a decision within 30 days if you plan to do major rate shopping. And if the scoring engine finds mortgage or auto inquiries older than 30 days, it groups those inquiries into a typical shopping period as well. So, yes you can shop, just do so wisely.

I advise you to let one lender pull your credit; they can tell you what your score is, and then you can inform other lenders what your score is for the purpose of comparing loans. You can also ask what your debt to income ratio is. With that information, a lender should be able to give you a Good Faith Estimate and Truth in Lending that’s pretty spot on. If they say they can’t do so without pulling a credit report, then move on. A lender should be able to give you an estimate if you know the answers to the right questions. And since it’s an estimate, if you give the wrong information, be aware that all bets are off. As long as you are aware that what you are quoted is based on the information you’ve given(as yet unverified), the lender should be able to give you information that allows you to choose them from other considerations. When you’ve made the final choice, the lender will then have to pull your credit to move forward if they have not done so already.

So, be a smart shopper. But don’t be careless with your information. It could hurt you if you don’t share it wisely.

Giving Thanks to the FHA for It’s Adjustable Rate Mortgage Solution!

MSNBC reported recently that the third quarter saw a 30 percent jump in foreclosures, and 45 out of 50 states report increased levels. This recent news seemed like a good reason to revisit this very real problem. Many will be “thankful” the FHA has come up with a temporary program known as “The FHASecure Initiative,” that may give some relief.

A gentleman called me the other day about what he could do about his adjustable rate mortgage (ARM) that would soon be adjusting or in plain talk, reflecting a significant payment increase. Like so many homeowners, he did not anticipate the tightening of underwriting requirements and being stuck with his dramatic mortgage payment reset he couldn’t possibly afford.(go to the articles section of www.kristinmortgage.com for more information on ARM loans). Most of us sweat when we go to the grocery store and find out we spent $250.00 on groceries instead of our budgeted $150.00. Facing a huge jump in our mortgage payment would give a large majority of us heart palpitations! This situation is difficult for those with ARM loans about to reset. To make matters worse, many of these homeowners are boxed out of conventional financing because of recent, more stringent underwriting guidelines imposed.

What can be done?

The Federal Housing Administration (FHA) has released a new initiative which enables homeowners to refinance their mortgage when faced with adjusting mortgages that they can no longer afford. The program, known as “The FHASecure Initiative,” is a temporary program, and applications must be signed no later than December 31, 2008. I am going to repeat this point because it is important. An application must be signed no later than December 31, 2008. If you even think this program is something you should consider, do your homework now. Get a mortgage specialist to help you through the details of where you are today, what could happen tomorrow and what you can expect from this FHASecure Initiative program. If you do not have a mortgage specialist go to your bank, ask a friend or realtor for a name of a mortgage specialist, or call me.

The FHASecure Initiative allows lenders and homeowners to refinance mortgages which may result in delinquency once the loan is reset, or in some special circumstances, even if the loan has already become delinquent.

The mortgages in question must involve non-FHA adjustable rate mortgages where the homeowner’s mortgage payment history during the 6 months prior to the reset showed no instances of late payments. If there is sufficient equity in the home, with some further strings attached, you may be able to refinance even if you’re currently behind in payments. The lender must prove that with an FHA refinance, the borrower has enough income and reserves to make payments under FHA’s guidelines. Still confused? Contact a mortgage specialist to help you sort through these guidelines as they apply to your situation. Remember, asking the questions is simply educating yourself and will not obligate you in anyway. It’s about protecting your hard earned investment and safeguarding your credit history.

Nationwide, FHA will loan money based upon 97.75% of the appraiser’s estimate of value. The maximum mortgage amount allowed for a single family home varies depending upon you live. There is no income limit for this product, and individuals with credit scores below 620 may qualify for financing. FHA will allow you to roll the first lien, and second mortgage used to purchase the home originally, closing costs, prepaid expenses, discount points, prepayment penalties, and late charges. In a nutshell, it is a fairly flexible product that might be just what the doctor ordered for some of us.

In summary, this product is an excellent solution for many of those subprime mortgages or ARM products we’ve heard so much about on the news. Hopefully, if you are one of those borrowers, this article can open a door for you were afraid was about to slam shut! Oh, and by the way, did I mention that the FHASecure Initiative is a temporary program, and applications must be signed no later than December 31, 2008?

Please email your home loan financing questions to Kristin Abouelata, Mortgage Specialist, at question@kristinmortgage.com or call her directly for more information at (865) 567-0113. Kristin will try to answer all questions on her website www.kristinmortgage.com. Some questions and answers may be published with future articles.

Buying Your First Home, It’s Easier Than You Think! – Now what? Part III

For a first time homebuyer, once you’ve found a house and been pre-qualified for a home, the steps to closing can be somewhat confusing. It’s actually a simple process that when understood, actually makes sense.

You have found the perfect house. You can’t believe that you are actually buying it! You thought buying a house was only for old people with kids, you know, like in their thirties or something. Now what happens?

You’ve should already have been pre-qualified for a home loan by a mortgage specialist. In fact, that lender gave you a letter, saying as much, and you gave it to the seller, giving them peace of mind that your offer is real and you can back it up. Your credit has probably already been pulled and you’ve been given a copy of it. Your realtor will provide the fully executed sales contract to your lender. Upon receipt of this contract, your lender will update and get you all your documents and disclosures to sign, within three days of receipt of your contract. If your credit has already been pulled and you’ve seen these documents, expect a NEW set since you finally have a property in mind. And trust me, this is only the beginning of the deluge of documents you will see, sign and sign again.

Your lender will now go back to your loan and put in all the particulars of this property - such as taxes, homeowner’s association fees - and reflect any earnest money you may have put down with the contract. At this point, with a property determined, you can explore locking in an interest rate or reserving funds if the loan is through a particular housing agency. Your lender will also want to collect and update documentation that proves all you have related about yourself. I call it “eye balling” the documents. Assessments will be made if there is further documentation required to substantiate your loan application.

When all contract contingencies are removed, the lender will order the appraisal for your property. The lender chooses the appraiser and the type of appraisal necessary to ensure the value of the property. After all, it’s the lender’s money on the line, and in case you don’t repay your loan, the value of the loan may have to recouped in a foreclosure sale of the property. Not likely to happen, but the lender will make sure they are protected by the appraisal. The appraiser will notify all parties involved that there may be repairs required before the value can be found or the property will adhere to a certain standard required by the lender. The lender will communicate this information to your realtor to negotiate the repairs with the seller.

The lender prices, processes and assembles your loan for underwriting. They order title work from your chosen title company and coordinate all the pieces of the puzzle for the closing. They collect your homeowner’s insurance and share this information with the title company. The title company searches the title and rectifies any outstanding liens for closing. Sometimes, the title company finds old tax liens or worker’s liens (known as materialmen’s liens). They make sure that these liens will be satisfied prior to you taking ownership to the property. They also make sure that everything historically has been recorded and released properly.

Once the appraisal is received and the documents are submitted to underwriting for final approval, the lender receives an underwriting decision. Sometimes, there may be something in your file that will cause an underwriter to ask for more documentation. Sometimes, an underwriter will ask for additional comparable sales of homes in the area for the appraisal. Many times, a customer never knows that these conditions arise because their lender anticipates or addresses them for them. Sometimes a customer may be contacted for information. But, your mortgage specialist should have a good assessment of the situation and be able to validate and explain anything they ask of you.

Two days before closing, you will receive a HUD-1 Settlement Statement from your lender and/or title company. This document is summation of all the charges and fees in connection with your loan. You will be asked to review this document to ensure that it is correct. It will also reflect how much cash you will need to bring to closing.

At the closing, all parties involved usually show up at the same time to sign documents. Sometimes, the seller and the buyer sign separately due to scheduling conflicts. Your realtor and your lender should be expected to attend your closing. You will sign a stack of huge documents, but when all is said and done, you will handed the keys to your new home!

Your lender, realtor and title company should all work to make this process as seamless for you as possible. Their job is to make this experience an informed, easy and worry free process. You will have to make certain decisions, but you should be informed so that they do not overwhelm you. It’s easy to forget how mind boggling all the documentation can be in the home loan process when are exposed to it every day as part of your job. Your lender should be patient and explain things simply -no smoke and mirrors. Buying a home doesn’t need to be difficult or stressful. A good lender will make it exciting and educational!

Because you can, visit: Home loan Knoxville TN

So, you found an article taped to your iPOD, “Psst…Tell Your Kids that Buying a Home Is Easier than They Think!” Part II

Just out of school and considering buying your first home? You’ll be surprised how easy it can be to qualify for a loan. Too often, the newly minted workforce doesn’t realize the confidence lenders have in their ability to be responsible homeowners.

Ok, so Mom and Dad told you that you need to buy a house. You've graduated from college and you're earning a decent income. Even though you don't feel like it most of the time, you are officially all grown up. But you ask yourself, "I'm only twenty-four years old, who would possibly loan me money to buy a house?"

First time homebuyer programs are established with flexible guidelines to attract – you guessed it –first time homebuyers! You are in a great position to buy a home provided you have established some history of decent credit. Even if you don't have traditional lines of credit to show for yourself, you may have established non-traditional credit and not even realized it. Do you have utilities, a cell phone and cable bill in your name? Have you paid them on time for 12 months? Then you have established non-traditional credit. Granted, many of you already have a credit card or gas card in your name. That's why Dad wanted your name on it, too. Good thinking on his part. At the time, you were just excited to get the credit card "for emergencies." It didn't even occur to you that you were establishing a good credit history.

Most lenders want to see at least a year under your belt earning income. The majority of new job workers are making at or under the median income limit for their area. There are those that beat the curve, but then, if you're making that much money on your first job, you don't need a first time homebuyer program. You can probably take another route to your first home. Also, recent graduates can get credit for having a diploma. If you have a diploma and an employer who is willing to verify that you earn what you say and are likely to continue on with them, then you're good to go -even without a year's employment history to show for yourself.

Some lending programs ask that a borrower have maintained an excellent rental history, preferably a two year history. But, you don't get penalized if you have been living at home. Especially, if home is in the same city that your school is located. You are simply asked to provide explanation as to how you managed to live rent free. Sometimes, Mom and Dad have to provide a written statement. They're probably willing to do that to get you out of the house and off the payroll.

What about a down payment and closing costs? Most programs will allow a seller to chip in 3% of the sales price toward your closing costs. This allowance can cover most if not all of your closing costs. Your realtor simply needs to be aware that you need this concession so she/he can negotiate it with your purchase contract. And how much do you have to come up with for a down payment? How about $0? Nearly all first time homebuyer programs are designed for empty pocket consumers with potential to earn more and maintain good credit. Some programs don't require you to have any reserves in the bank. Since so many first time homebuyers live on a budget, these programs allow for the reality of life. And you can be rewarded for being a conscientious consumer with lower than average interest rates being available to you.

You may be ready to buy your first home and not even know it. A good mortgage specialist will pre-qualify you, find out what you can afford or what your comfortable paying. Then, you just have to find the right home. It's easier than you think!

Because you can, visit: Home loan Knoxville TN

Series Part I Psst…Tell Your Kids that Buying a Home Is Easier than They Think!

We encourage our kids to plan for their future, but we seldom include buying a first home sooner than average as a path to building that future. Let them know buying a home is easier than they think.

Most of the people who read this column are not first time homebuyers. The fact of the matter is many of you that are first time homebuyers and reading this article are relatively mature individuals who are fighting off your commitment fears of being tied to a mortgage. But there is a huge segment of the population that could buy their first home, yet it doesn’t occur to them to do so. Who are these people? Well, it’s your 24 year old son or daughter, new to the work force, and is throwing away money on rent somewhere. Encouraging your children to buy a home when they are young is some of the soundest financial advice you can give them. Equity in a home is an easy way to grow one’s portfolio with very little investment. But the fact of the matter is it doesn’t occur to most of us to encourage the younger generation to buy early in their lives. And trust me, it rarely occurs to our kids themselves to consider buying a home in the early twenties. They are more concerned with buying a new Halo 3 for their Xbox.

Why do so many people miss the boat on this opportunity? It could be they plan to be in the area for only a short time because they will job hop to advance their career, thus viewing a mortgage as “too permanent.” I counter to simply sell the house when you move. Or maybe they expect their income to double or triple over the next three years. I say buy a home now, then upgrade to a new home; sell or rent the old house. Investing in real estate is a proven, safe and solid return on investment. And with the right combination of credit history (or a history of paying utilities, cable and your cell phone on time) and no money down, you or someone you care about can start investing in the future.

When Junior starts his new job at the company and 401(K) is available, he’s been informed by his folks, boss or peers to enroll and contribute at least a little something to it with every paycheck. Yet, he is rarely counseled quit renting that apartment for $750 a month and buy a $75,000 house. Where will he come up with the money to do it? There are multiple options for first time buyers that allow for 100% financing. Get the seller to kick in closing costs (up to 6% of sales price with some products), and one can close on a loan and bring no funds to the table. If your home value appreciates 4% in the next year, that’s a nice return on a no cash investment.

For some time, I’ve considered writing this series for first time buyers to let them know buying a home is easier than they think. But, the more I thought about it, the more I realized the advice I would offer would most likely not reach my target audience. So parents, it is up to you to supply your kids with this last little bit of advice and help to set them free to further establish their independence in this world. Clip this article out and tape it to their iPOD or the steering wheel of their car – someplace it will get noticed.

I think for most of us who have been through the experience, our first home buy was a very daunting experience. There are so many choices and unknowns - it can be overwhelming. In this series, I will try to break it down the process into small logical steps and make it easier understand the steps involved in financing your first home. Where do you start? That is perhaps the easiest part. Our newly established worker should first make a list of all his or her debt obligations such as student loans (unless deferred), car payments, credit card debt, etc. Hopefully at this age, this will be a small list. Then add what you think amount you could afford for a mortgage. Take that amount and divide it by your gross monthly income. If you come in at 43% or less, you’re in business. If you have something in your savings or checking - great. If not, don’t let it deter you. You have options.

Contact a mortgage specialist to drill out the details and find a good realtor who knows your market for housing you can afford. What next? Get ready to tell your landlord “Adios!.”

Because you can, visit: Home loan Knoxville TN

For Sale by Owner (FSBO)), what do I need to know?

FSBO or For Sale by Owner can be a hugely successful endeavor and can save you money. But to be successful, this endeavor must be executed correctly. Below are a few tips that may help you be successful in this venture.

Price the Home Correctly: It is crucial that you research and place the correct price tag on your home when selling it. A reputable real estate agent is the first person to contact to help appraise your home. Many agents won’t lend you the time of day to assist you with this aspect since they aren’t listing your home. But a good agent will do it for you with no strings attached. They realize that their business is based on reputation and referrals. They may not get this listing, but you may want them to represent you in your next home purchase. Or your cousin may need a good realtor’s help in the future. Do your homework. Find similar homes in your area and compare their price tags. Are the homesas attractive as yours? Are they as large as yours? Pricing the home correctly is crucial.

Use your time: A FSBO property allows you to place your home on the market for the maximum price to see if it sells quickly. If you have a deadline to sell your home, market it yourself well in advance of this deadline. Later, if you feel you need a realtor’s help, you haven’t painted yourself into a corner. You still have time to market and sell the property correctly.

Market the Home: Make it easy for people to know more about your home without investing too much time. Put a For Sale by Owner sign in the front yard with contact numbers. Put a brochure with information out front so people can pre-screen the information and not waste your time. Talk to your local paper or other FSBO’s and investigate whether placing an ad in the local paper has had results. Different markets yield different results. Consider hosting an open house, but make sure you get the information out to the right market.

Put Your Home’s Best Foot Forward: You want to make sure your home sends the right message to prospective buyers. People have to be able to see themselves in that home. What is the first impression when driving up to the home? What’s the feeling inside? Take measure to provide maximum curb appeal. You want to make sure people want to come inside the house. The outside of your home should entice them to do so. The interior should be clean, airy and free of clutter. Try to make the home smell good and pack away personal effects that remind prospects someone else lives there. The realtor that helps you determine a market price should be able to make suggestions in this area that will make your home more marketable.

Is Your Prospect Qualified?: Make sure your buyer is pre-qualified before entertaining their offer. You can request that a preferred mortgage lender you trust or another reputable lender provide this service. If a person isn’t qualified to buy your home, you don’t want to lose valuable marketing opportunity to attract other prospects. Do not take verbal offers seriously. A serious prospect will sign a contract and provide earnest money as a show of good faith. Make sure you are using a legal contract and that it is executed properly and protects your interest. Again, that real estate agent who helped you earlier or an attorney may be a good idea at this juncture. A well executed sales contract is worth its weight in gold.

Of course all of the above is based upon my personal opinion and experience. Use these thoughts for informational purposes only. And good luck selling your home!

Because you can, visit: Home loan Knoxville TN

GOOD FAITH ESTIMATES - EVERYTHING YOU NEED TO KNOW BUT WERE AFRAID TO ASK

If you've ever been through the home buying process before, you know that the Good Faith Estimate is one of the most important documents you will review to make a decision about your home financing. Oftentimes, you may request this document from multiple lenders and get completely different looking paperwork and figures. But in essence, there are only a few key factors you should focus on when comparing these documents.

One the these key factors to compare, bottom line, is the amount of closing costs you are being charged. I once had a customer who told me that he was quoted a 6% rate with no discount points and no origination fees. My good faith estimate also had a 6% rate, but I was charging a 1% discount fee charge. I asked to see his good faith estimate from the other lender. The other lender had inflated the closing costs to make up the money that would otherwise have been collected by a discount fee.

Clever, but not necessarily upfront. When it was all said and done, my total costs were cheaper by almost $400. What it boils down to is all secondary market lenders have access to basically the same rate. We just package it differently. By charging my customer the discount fee upfront, my customer earned the benefit of the tax deduction afforded this charge. So, lesson number one, if a quote is completely out of the ballpark from what someone else is quoting, there is probably a good explanation behind it. It's possible that they can really offer something out of the ordinary once in a while, but doubtful.

The other key factor to compare is the payment, but don't get caught up the escrow portion of the payment. Your escrows will be what they will be at closing. No lender has control over what you decide to pay for homeowner's insurance or what your county taxes are. Lenders simply guess at that figure. So, in general, you shouldn't focus too much on "pre-paids." They are what they are, and will be finalized when you get to the closing table. When looking at a payment, it is more important to compare the principal and interest and if applicable, mortgage insurance portions of the payment breakdown. As I said before, your escrows payments (taxes, insurance) will be finalized later.

You should never have to have your credit pulled before someone gives you a good faith estimate, nor should you pay for the estimate. Some lenders will require the aforementioned in hopes of "tying" you to them. The best advice is to find someone you like and trust when shopping for a mortgage. You want someone who will take care of the details and whom you can depend upon.

Because you can, visit: Home loan Knoxville TN