Some mortgage lenders and mortgage brokers use a variety of tricks to ensure that a potential customer concludes a mortgage transaction with their company.
The most common of these schemes is the “application fee”. This fee, which can vary between $400 to $800, is charged upfront with the promise that it will be returned once the loan is concluded. There are various excuses for charging this fee, but in reality the fee is charged with the sole purpose of keeping the customer captive.
Suppose you just paid an application fee to one lender only to find a much better deal with a different lender. You an either stay with the original lender or switch to the new lender and lose the application fee you have already paid. You’re trapped!
Another trick is charging an appraisal fee when the appraisal may not even be necessary. Sometimes, under the Fannie Mae Home Affordable program, an appraisal is not required. If the lender hasn’t done their homework or they are unscrupulous, they may charge an unwary customer a non-refundable appraisal fee upfront. They may even say that the “application fee” covers the appraisal which was never needed in the first place.
Be aware of these ploys when getting mortgage quotes. Avoid dealing with companies that demand an upfront application fee. And make sure that you are working with a lender who has checked to make sure that an appraisal is required.
When possible, try to work with companies that offer a free float down if rates improve. Instead of paying money upfront…do your due diligence upfront.
Posted by Terry Brunner. Terry is a Senior Loan Officer with Horizon Financial. Terry can be reached toll free @ (877) 627-9211 x150 or email TBrunner@HorizonFinancial.org. Visit Horizon’s website at www.horizonfinancial.org
