6. All borrowers should be told the steps that must be taken to go from an
application to a completed loan including the time estimate for each step and
the total time for the entire transaction. Borrowers should understand where
delays may happen and who might cause them including themselves.
7. Borrowers purchasing a house should understand that closing costs, exclusive
of points, will always be less than standard closing costs on a refinance. This
happens because the title policy is dramatically lower as the title
company is getting a full policy on the exchange of the property (sale) and
discounts the borrowers loan policy. Escrow for the purchase will generally
be higher because it facilitates the sale, not just the loan.
8. Borrowers are never forced to take (pay for) points in any circumstance
except if they need to get a lower rate to qualify for the loan. Otherwise
points are just used to buy down the interest rate. (See previous column
What's the Point).
9. Sub prime borrowers should have only one goal when taking a sub prime loan,
to improve their credit by making their payments on time and refinance to a
prime loan as quickly as possible. Therefore sub prime borrowers should
never take a longer term than necessary to repair their credit.
10. Borrowers should deal in good faith with the lender and expect the same
good faith dealing from the lender. If they do not receive the respect and
fair dealing from the lender they should not conclude the transaction. The
customer is king!
If everyone who enters the mortgage market to finance a house, whether a primary, second home or rental would demand what is due then fewer borrowers, by the thousands, would not be put into precarious financial positions out of lack of knowledge about the industry and fear of asking for the proper information. It is time to upgrade the mortgage industry, replace the misleading information with true and honest facts and upgrade the American homeowner to one who is constantly improving his or her position and not moving backward.