To help deal with the workload,
mortgage banking and brokerage
companies added 44,000 jobs in
the first nine months of 2002
alone. But many of these new
hires are either inexperienced
or are temporary employees with
no banking background. Errors
are bound to occur; promises are
apt to be forgotten. Don't
expect banks to catch these
glitches. But you can. Here's
how.
RESEARCH YOUR CREDIT Errors on
your credit report can affect
the interest rate you receive.
Each of the major credit bureaus
can provide you with your own
report for a fee, or Web
services such as
www.freecreditreport.com will
let you order a free report as
part of a trial membership to
their credit monitoring service.
Check the report carefully. If
you spot an error, you'll need
to contact the major credit
bureaus to correct it (Web sites
that give you access to your
report can also guide you
through this process). At the
same time, you'll have to let
your lender know about the
error, avoiding the chance it
might affect the rate you've
been quoted.
CHECK YOUR APR. The annual
percentage rate (APR) is what
you will pay on your loan every
year once certain fees are
factored in. Always check it to
see if it is significantly
higher than the good-faith
estimate you should have
received when you agreed to the
loan. Be prepared to ask for an
explanation of any change.
QUESTION FEES. Scan your
paperwork for any charges listed
as "underwriting," "document
preparation," or "administrative
fees." Mortgage experts say such
charges are often negotiable
because their main purpose is to
help lenders cover their costs
on the loan. "If you ask enough
questions, you may be able to
find which fees can be used as
bargaining chips," says Holden
Lewis, financial reporter and
spokesman for Bankrate.com, a
Web site devoted to helping
consumers make informed
financial decisions. At the same
time, realize that many fees,
such as those for obtaining your
credit report and a home
appraisal, are a reasonable cost
of doing business.
KEEP AN EYE ON YOUR ESCROW
PAYMENT. Escrow is money your
bank holds to pay for a year's
worth of taxes and other fees
(such as insurance). Make sure
you know when your property
taxes are due so that the lender
doesn't collect too much or not
enough money from you to cover
tax payments, Levy advises. Some
lenders don't require an escrow.
That means you're responsible
for having the money ready when
taxes are due, but you can
collect any interest if the
money is kept in a savings
account. If you have
self-discipline, it's worth
considering.
USE YOUR GRACE PERIOD. Whenever
the topic of mortgage math
errors come up, consumer
advocates have always
recommended comparing your
good-faith estimate of closing
costs with the actual one that
showed up in your HUD-l, an
accounting of your final closing
costs. That document, by law, is
supposed to be delivered to you
24 hours before closing.
"The problem is, lenders are so
deluged with applications, they
are quite literally giving us
loan documents the day of
closing," Levy says. That's not
enough time to study the costs.
But don't fret. After signing
the papers, by law you have
three business days in which you
may cancel the deal. So if the
numbers don't match and you feel
you've been rushed into a
financial arrangement other than
what was promised, you can
always walk away.
MORTGAGE MODIFIERS
If the lender who provided money
for the initial purchase of your
home still holds the mortgage,
ask if the company will modify
rather than refinance your loan,
suggests Holden Lewis, a
financial expert with
Bankrate.com. If you can
negotiate a modification rather
than a refinancing, you'll save
money because you won't be
creating a new loan with all the
fees that accompany it. By
modifying the existing loan, the
lender gives you a reduced
interest rate, same as if you
were refinancing. But the time
to pay off remains the same as
what you had with the original
loan. So if you bought your home
three years ago with a 30-year
fixed mortgage, you'll still
have 27 more years of payments.
With a refinancing, the pay-off
time rolls back to 30 years
again.
If your original lender still
holds the mortgage on your home
but has a policy against loan
modifications, ask about a
streamlined refinance loan that
may eliminate the appraisal, or
ask for a break on some of the
fees. Lenders may be amenable to
this because they have done
business with you before, and
don't want to lose you to a
competitor.
--Larry Keller is a financial
reporter based in Florida.
Debt Consolidation. Credit Card, Tax & Student
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