When is a deal on an internet mortgage not really a good deal? The answer is: When the loan never closes.
Every once in a while I have an experience which I feel I need to share with my clients. Here’s one of those horror stories I just went through.
Recently, another broker brought me a contract on one of my listings. As is the custom, they included a lender prequalification letter. The letter was from an Internet-based loan broker.
That was great news for me and the seller. Not only did we have an acceptable offer we also had a buyer who was qualified to obtain a loan.
Unfortunately, the story goes downhill from there. Doing my job to protect the interests of the seller, I called the lender many times to follow up on the progress of the loan processing. From the first of my conversations with this lender, I smelled a rat. That’s why I kept calling and calling. Sure enough, the lender ended up telling us he couldn’t close on time and we had to make an extension for the closing date. This was a great inconvenience to the Seller and cost them some money. But we did it because we felt we had the right buyer for this home.
Well, it wasn’t just one closing extension that we had to grant. It ended up being three weeks worth of extensions. The seller was furious and that almost caused the deal to crash.
When I finally got to ask the buyer why he went with this Internet broker, he said it was because because he would receive a $1000 credit card to some department store or grocery store credit. Plus, they offered a lower interest rate than they find elsewhere.
Here is the misconception the buyer had. The interest rate would have been half percent higher than market rate AND closing costs were in excess of $1,000 more than that offered by a local mortgage company.
As a listing broker, I would always like to be able to direct were a buyer for one of my listing gets his loan. But, of course, I can’t. Buyers always think they have a better deal without going through what they think is a middleman. Many times the Realtor is viewed as just narrow minded at best. At worst, people think the Realtor is getting a kickback. But the lenders I use don’t kickback anything except that they deliver good service and close on the date specified in the contract. A lender I use would have saved the buyer more than $1000 in closing costs and we would have closed on time. Plus, the interest rate would have actually been lower.
Moral of the story is we did use my lender of choice and we closed in 10 days of loan application.
The rate was a half percentage point lower then the internet lender and buyer saved $1,500 in closing cost and fees. They the internet lender was going to charge. But more important we actually closed!!
A borrower should shop around to find the best rates and fees. Have the lender send you a good faith
estimate so that you can compare apples to apples.
Most internet lenders will quote you a low rate and free credit or free something else to get your business, it sounds good. However most of the time it is to good to be true and almost always it turns into a processing nightmare that can jeopardize the entire transaction..
Even though the buyer was not my client, they thanked both me and my lender, who they ultimately did use, for being honest, efficient and closing in short time period. This nightmare has a happy ending for everyone.