Pat Starnes Snippets: Choose A Reputable Lender When Financing Your Dream Home

Choose A Reputable Lender When Financing Your Dream Home

Keys with HouseMy seller client and I have a closing scheduled for tomorrow, so we reviewed the settlement statement today. 

I have reviewed settlement statements on behalf of my clients for years. It's best to review them in advance so any corrections can be made before we arrive at the closing table.

I'll verify that the seller's portion of the closing costs is properly stated, the taxes and HOA fees are pro-rated between buyer and seller, loan payoff is accurate, the real estate commission correct, etc.

On this particular transaction, the seller's summary was simple. Everything was in perfect order and reflected as per the terms of the sales contract.

 

Then my eyes glanced over to the buyer's column.

 

BAM!

 

I couldn't believe my eyes!

The outrageous fees charged by this out-of-state lender

made me do a double-take.

 

The buyer is being charged SEVERAL THOUSAND DOLLARS in POINTS (around 3%), in addition to a hefty origination fee to obtain a loan that, when all the adjustments are made, is still comparable to "the going rate" with local lenders.

Considering our current record low interest rates, it doesn't make sense to spend thousands of dollars paying "points" to buy down the interest rate even further.

For those who don't know what "points" are, here is a brief description:

 

Let's say your loan amount is $250,000 and the prevailing interest rate is 4.25%. The lender can lower your interest rate if you pay a "point", which is 1% of the loan amount. In this case, you could pay an additional $2,500 to lower the interest rate by .25%. 

 

Is it beneficial to pay "points" to buy down a mortgage? For some people, perhaps. You can calculate whether paying points to lower the already historically low interest rate is right for you, by dividing the cost of the buydown ($2500) by the monthly savings. If you stay in the home longer than six years, you could realize a savings. If you sell before the break even point, it's money you won't get back.

 

Understand, I am not the buyer's representative in this transaction. Another agent brought the buyer to the table. I do not know the relationship between this Realtor and the buyer; nor do I know if the LENDER supplied the Realtor this lead through a business referral.

Cartoon of People Talking

 

If I were representing this couple, we would have had a long discussion regarding "points" and whether or not it was a worthy expense.

 

Better yet, I would have referred them to one of my LOCAL, trusted loan originators who would have discussed their financial needs and future plans and together THEY could formulate the best course of action.

 

 

When considering a home purchase,

choose a reputable lender to finance your dream home. 

 

Image #1 courtesy of phanlop88 at FreeDigitalPhotos.net

Image #2 courtesy of mapichai at FreeDigitalPhotos.net

 

Written and Published by Pat Starnes REALTOR

Join ActiveRain for Free - Pat Starnes   facebook   google plus   twitter   linkedin   pinterest

Pat specializes in Residential and New Home Sales 

Primary Service Area:

Brandon, Pearl, Ridgeland, Flowood, Madison and the Ross Barnett Reservoir area

 Pat Starnes, Broker Associate

Front Gate Real Estate, 6700 Old Canton Rd., Suite C

Ridgeland, MS 39157

601-991-2900 - Office

601-278-4513 - Cell

 

Recent Blog Posts by Pat Starnes:

 

Greenfield Station in Brandon MS Continues to Grow

Six Easy Tips to Save Money on Your Home Inspection

Should You Consult a Realtor When Buying New Construction?

Homes for Sale in Scottish Hills ~ Brandon MS 39047

Homes for Sale in Hidden Hills Subdivision, Brandon, MS 39047

Homes for Sale in Castlewoods Subdivision, Brandon, MS 39047

Gardens of Manship Neighborhood Information - Brandon, MS 39047

 

Are you looking to buy or sell a home in the Brandon MS market? Call me!

Comment balloon 30 commentsPat Starnes-Front Gate Realty • October 28 2015 01:36PM

Comments

Nothing beats a local lender.  Not even a big lender like USAA who is a call center lender.  Local lenders are the ones to deal with for the best rates, best terms and best service.

Posted by Chris Ann Cleland, Associate Broker, Bristow, VA (Long and Foster REALTORS®, Gainesville, VA) over 3 years ago

Since you are not representing the buyer, their could be things that you are not aware of.  Maybe this buyer has really low fico scores which would have jumped up his interest rate had he not bought it down.  Who knows, but it is disturbing when we feel that the other party is being taken advantage of.

Posted by Belinda Spillman, Colorado Living! (Aspen Lane Real Estate Colorful Colorado) over 3 years ago

Pam - Very true. It is important to choose the right lender when financing any home.

Posted by John Pusa, Your All Time Realtor With Exceptional Service (Berkshire Hathaway Home Services Crest) over 3 years ago

Pat like Belinda stated in the comment above there could have been credit issues which created the need for points.  But whether there were issues or not, your practice of suggesting a local trusted Lender is an excellent one.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 3 years ago

I like looking the person I am doing business with in the eye. I don't know why this other agent didn't get them approved locally.

Posted by Evelyn Johnston, The People You Know, Like and Trust! (Friends & Neighbors Real Estate) over 3 years ago

Local is always best, especially when there is a last minute hiccup! Thanks!

Posted by Paul McFadden, Pest Control, Seattle, WA. (Paratex) over 3 years ago

Chris Ann Cleland - It's funny how we were both thinking alike today. I always recommend using local vendors, whether that be attorneys, lenders, inspectors, appraisers, etc. People located out of state are not familiar with the local market and local rules and regulations.

Belinda Spillman - you're right, of course. There could have been more to the story. The lender is nationally known so I think my instincts are right on this "point". :)

 

Posted by Pat Starnes-Front Gate Realty, 601-991-2900 Office; 601-278-4513 Cell (Front Gate Real Estate) over 3 years ago

John Pusa - Thanks, John. I vote local service.

George Souto - My local trusted lenders have saved the day many times for my clients. I'm not sure an out-of-state lender would go to bat (hold hands, give advice, etc.) and go to such lengths to ensure smooth closings as a local lender would.

 

Posted by Pat Starnes-Front Gate Realty, 601-991-2900 Office; 601-278-4513 Cell (Front Gate Real Estate) over 3 years ago

Pat Starnes We have seen this scenario9 play out so many times in the past and for some reason, buyers continue to allow themselves to be taken to the cleaners on financing and not trust our advice in this regard, but they will trust us enough to sell them a house. I just don't get it!

Posted by Sandy Padula and Norm Padula, JD, GRI, Presence, Persistence & Perseverance (HomeSmart Realty West & Geneva Financial, Llc.) over 3 years ago

Evelyn Johnston - It's nice to sit across the table and have a conversation, isn't it?

Paul McFadden - Hiccups are not appreciated, but yes, if and when they happen, it's worth a lot to have expert local assistance.

Posted by Pat Starnes-Front Gate Realty, 601-991-2900 Office; 601-278-4513 Cell (Front Gate Real Estate) over 3 years ago

Sandy Padula and Norm Padula, JD, GRI - I spoke with one of my lenders about this today. She said millenials are more comfortable on their computers and rely more on internet references than they do from personal referrals; that's likely how the out of state lender got involved.

Posted by Pat Starnes-Front Gate Realty, 601-991-2900 Office; 601-278-4513 Cell (Front Gate Real Estate) over 3 years ago

You never know their circumstances.  Could be that their credit score lead to a higher rate and had the cash to by it back down.  I agree a reputable lender is good, but I never judge before I know details.

Posted by Tammy Lankford,, Broker GA Lake Sinclair/Eatonton/Milledgeville (Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668) over 3 years ago

Things come up and I used to hear the horror stories about out of state or larger lenders

Posted by Paul McFadden, Pest Control, Seattle, WA. (Paratex) over 3 years ago

Perfect examples of why you need a good local lender. Saw  an estimate of cost from an out of area lender. Gave the buyer a local lender. His costs were $2500 less. Lot of Money.

Posted by Bill Reddington, Destin Florida Real Estate (Re/max Southern Realty) over 3 years ago

from the appraisers, to the fees, to ordering title, to the "local know how", to service...using a local lender helps...let's just say I may be a bit bias...I am married to one of the "local lenders"...so HE has extra pressure to be a Great Mortgage Guy...if momma's clients ain't happy, well you know the rest....  :)

Posted by Melissa Polce, Lake to Land, I've Got It Covered! (ERA, Wilkinson Real Estate Charlotte) over 3 years ago

Tammy Lankford - I know it sounds judge-y; it was such a large outlay of cash, it was shocking. Regardless of the reason, it's still going to take 7 years to make that money back, IF they live in the house that long.

Bill Reddington - you know what I'm talking about, Bill. Thank you!

Melissa Polce - Does that cause many problems at home? Any disclosure issues? At least he's local!

Posted by Pat Starnes-Front Gate Realty, 601-991-2900 Office; 601-278-4513 Cell (Front Gate Real Estate) over 3 years ago

Love those words Pat Starnes.     Choose A Reputable Lender When Financing Your Dream Home 

Posted by DEANNA EARLY - - ( NMLS # 268590 ), Highest Ranked Mortgage Loan Originator Virginia (American National Bank & Trust) over 3 years ago

Unbelievable how some people take advantage of clients.....great advice on choosing a reputable lender and why!

Posted by Roger D. Mucci, Lets shake things up at your home today! (Shaken...with a Twist 216.633.2092) over 3 years ago

I hope home buyers will read this post and learn from it. Thank you for sharing.

Posted by Gita Bantwal, REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel (RE/MAX Centre Realtors) over 3 years ago

Perhaps this was the only place that would give them a loan, but the bottom line is key - shop around and choose a reputable lender who will get you the best deal.

Posted by Kat Palmiotti, The House Kat (Grand Lux Realty, Monroe NY, 914-419-0270, kat@thehousekat.com) over 3 years ago

Deanna Early - I thought you would agree. ;-) Local is the way to go.

Roger D. Mucci - There just doesn't seem to be a good argument for paying points with interest rates historically low.

Gita Bantwal - Home buyers, especially first time buyers, look to their Realtor for advice. I hope most will consider our advice before taking what could be a costly step on their own.

Posted by Pat Starnes-Front Gate Realty, 601-991-2900 Office; 601-278-4513 Cell (Front Gate Real Estate) over 3 years ago

@Pat Starnes, we never have any disclosure issues, as a matter of fact I disclose this to everyone upfront if he is my buyers lender, it's funny-I think all other parties actually feel very comfortable b/c if I write an offer & he is the lender-you can be almost 100% the deal will close...he "vets" the buyers pretty good so no one wastes their time...he has also saved deals when I was the listing agent & something goes wrong with another agents buyer-although we talk "shop" almost 24/7 together- specific customers  & clients don't come up-as a Real Estate Agent, I think everyone should get their own lender spouse, Thats Local! :)

Posted by Melissa Polce, Lake to Land, I've Got It Covered! (ERA, Wilkinson Real Estate Charlotte) over 3 years ago

Can't judge without knowing all the details.  I think with the tighter reigns the government have on lenders this buyer would know up front what they were getting into I would assume?

Posted by Kathryn J., Rentec Direct (Rentec Direct) over 3 years ago

Kathryn J. - I'm sure the buyer knows what they are paying, I'm just not sure they comparison shopped their mortgage. If buying a home is the largest personal financial transaction most people enter into, then shopping their mortgage should rank right up there. Thousands of dollars can be needlessly spent if a borrower does not investigate their options.

Posted by Pat Starnes-Front Gate Realty, 601-991-2900 Office; 601-278-4513 Cell (Front Gate Real Estate) over 3 years ago

It is so very important to have this one sewed up tight.  I like the idea of a team, you know, people you've done business with in the past that you know can and will get things done.  

Posted by David Alan Baker Laveen & South Phoenix Realtor, Your local Expert (Keller Williams Realty Phoenix) over 3 years ago

David Baker Realtor - Laveen Homes for sale - the sale closed with no hiccups. And since I represented the seller, not the buyer, the "team" was out of my reach.

Posted by Pat Starnes-Front Gate Realty, 601-991-2900 Office; 601-278-4513 Cell (Front Gate Real Estate) over 3 years ago

Pat Starnes happened once with me when buyer went with one - despite my request to check everything while working with Internet based lender.

The result was almost similar - not to mention about the delay in closing. 

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (LAER Realty Partners) over 3 years ago

While I agree with those that suggest that we can't know the details of this Buyer's finances or scenario ... I agree with your statement regarding the importance of "doing homework" when borrowing monies.  If this Borrower didn't do that ... 

Some Borrowers don't know any better.  Circumstances could dictate the outcome.  Others just won't take advice.  Still others don't make the effort to compare lenders.  Hard to know which is going on here, Pat Starnes ... but I certainly understand why alarms went off in YOUR head ...  so frustrating to see it happen!

Gene

Posted by Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi, 708.921.6331 - 40+ yrs experience (NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656) over 3 years ago

Gene Mundt, Chicago-area Mortgage Lender - www.genemundt.com - I still can't wrap my head around the fees. And it was an internet based lender, which made me very suspicious. I will always recommend my favorite local lenders as opposed to hopping online to find a lender.

Posted by Pat Starnes-Front Gate Realty, 601-991-2900 Office; 601-278-4513 Cell (Front Gate Real Estate) over 3 years ago

I see outlandish fees from lenders periodically. Tough to fix when the closing is tomorrow.

Posted by Bill Reddington, Destin Florida Real Estate (Re/max Southern Realty) over 3 years ago

This blog does not allow anonymous comments