There are many good, honorable mortgage lenders out there. I’ve worked with many who I trust to do absolutely the best they can for their clients and never worry about trying to get lending business by being less than honest. However, as we’ve seen in reports over the last few years, there have been plenty of people trying to sell mortgages who did it without regard for the well-being of the borrower, and had no qualms about mis-stating details in their loans that would come back to bite the borrower. The federal government has changed some of the rules that the lenders must follow in order to limit the damage a crooked lender can do. Kenneth Harney, a nationally known housing columnist, recently reported evidence that lenders are possibly skirting a new law that requires lenders to give their quotes via a Good Faith Estimate (GFE) which at closing will be compared to the actual closing numbers. Errors in estimates by the lender on the GFE larger than 10% must be paid by the lender. Some lenders are concerned about their ability to accurately estimate all of the fees since they don’t control some of them. Yet, I’ve found that when I put together estimates of closing costs for my clients, I can be quite accurate if the lender just gives me the numbers they control, and I add estimates based on experience for the others such as surveys and inspections.
Harney goes on to say that some lenders are responding to quote requests with what they call “worksheets” and “loan scenario” forms that are not bound by the federal laws. This is within the bounds of reason if you’re just getting rough estimates without having a specific property in mind. Just be sure you understand that when you are getting mortgage quotes on a specific property you want to buy, then you should ask for a Good Faith Estimate. That’s when the federal laws will kick in and protect you from a lender who tries to low-ball some of the numbers to make their quote look better than others.
The old saying still applies, “If it looks too good to be true, it probably is.”