Your Real Estate Advisor: Buyer Beware

Buyer Beware!
Be Careful—Don’t Borrow Trouble

1. Regular Banks and Credit Unions are your safest bet to avoid predatory lending practices. Federal regulations prohibit them from charging excessive fees, etc.
2. Choose reputable lenders, established in your city or state. Reputation is a powerful deterrent to unscrupulous practices.
3. If you have decided to use a mortgage broker, do so with care. Be sure you know how much you are borrowing to pay the broker fees, points, and closing costs, and/or other junk fees.
4. Insist that you get a “Good Faith Estimate” of all the costs associated with the loan within 3 days. It’s the law! Do you understand all the costs? Are they reasonable?
5. Remember: all real estate transactions that require a loan (purchase) will result in a lien being placed against your home.
6. Comparison shop at least two or three lenders. Use the “Good Faith Estimate” to determine who is really offering you the best deal. Rate is not the best way to tell. What are the actual costs of the loan? What are you paying in up-front prepaid finance charges? Is there a prepayment penalty?
7. Avoid single premium insurance. It is seldom a good idea.
8. Beware if the loan includes “yield spread premium.” This is actually an additional payment to the broker for getting you to accept a high cost loan.
9. Our economy is fragile. Fixed rate payments which include taxes and insurance will offer you the most stability in your housing budget. Be extremely cautious in considering a variable rate or a 2-1 buydown product. You are only delaying higher payments.
10. Review all the documents before you go the actual closing. Ask questions until you understand what you are signing.
11. Consider having an attorney (cost is very reasonable) to review your closing documents and/or attend closing with you for any real estate transaction: purchases, building, second mortgages, lines of equity, or refinancing.
12. Lastly, study the Disclosures section of the HOM website (www.homeownershipmatters.com), to help understand what the documents you sign at closing actually mean, and what rights you surrender when you sign them.

Copyright © 2009, HOM, LLC. All Rights Reserved.
“Your Real Estate Advisor” the column, by Mildred Wilkins

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Signing Documents

Q. Signing Documents

My wife and I purchased a home a month ago and we have not felt good about the whole deal from the time we left the closing. The lender we used had told us that we would have to pay points to get the rate down so we could afford the payment and we agreed to that. The problem is that when we got to the closing, the amount they had on the loan documents was a lot higher than what we had been told earlier by our lender. The title company said there was nothing they could do about it and that we just had to sign the papers? Is that true? We felt trapped, had all our stuff packed and felt we had no choice except to go ahead. Now we are not so sure. Did we make a mistake and if so, what can we do about it now?

A. The answers to your questions, in the order in which you asked them are: No. No. Yes and Probably not much.

Let’s talk about your problem which, unfortunately, happens all the time to folks. I will address first this specific situation and then the general problem of papers which don’t match up to what you had been led to believe would be included.

It is the responsibility of a title company to handle all the details of the closing in accordance with state law and in compliance with the details in the contract signed by the seller and the buyer. In addition, the title company is obligated to accept instructions from the lender for many details associated with the closing. Those details include what forms should be in the closing package what amounts should be inserted in all the documents related to money, etc. SO, when the title company said there was nothing they can do, what they meant was, “There is nothing we can do UNLESS the bank gives us some other instructions.”

When you are closing a real estate transaction the title company is the facilitator for that transaction. For a large percentage of closings, the title company has no relationship with either party and is simply being paid to process the paper work and assure that it is a transaction which was properly and legally handled. But there are times when the title company is, in fact, an agent for a party to the transaction. This is called dual agency. This means they are working for one specific party to the deal. This is most common if you are buying a new construction home and the title company is the company picked by the builder (sometimes owned by the builder) to handle all their transactions.

In addition, if the home you are buying is a bank-owned home, then the title company is, in fact, working for the owner of the foreclosed property (whether that is a lender, servicer or insurer/investor). SO, when the title company said there was nothing they could do, what they meant was “There is nothing we can change UNLESS we get different instructions from our principal (the lender/servicer/insurer).

Did you make a mistake? I have to tell you that you did. It probably doesn’t make you feel a lot better to know that almost everyone makes the same mistake.

THE MISTAKE: Believing that because someone presented you with papers that you must sign them. You DO NOT have to sign them. No, you can not go ahead with the transaction unless you sign them, but that also means that the other people can’t get what they want either. If you insist that the papers have to be changed to what you were told before (especially if you have a good faith estimate which documents the amounts you should be paying) then there is a very strong chance that the lender will change their instructions to the title company, the papers will be changed accordingly and then all of you can re-convene in order to close the deal.

This is almost certainly not going to happen this afternoon. But it can happen. It is worth holding out for. It is worth making everyone else uncomfortable until you get the deal you were told you would be getting.

Is there anything you can do now? I doubt it because you signed all the papers. You used your most prized possession and endorsed yourself into a pickle. You can hold on to the lesson you learned, share it with others and promise yourself to never again sign documents which you don’t clearly understand or which do not correspond to the agreement with the other party.

JUST DON’T DO IT!

© Copyright 2009, Home Ownership Matters, LLC. All rights Reserved. "Answer Book in a Foreclosure Climate" by Mildred Wilkins, available in 2009 from www.DovePublishingHouse.com.

(Please e-mail Heather at homeownershipmatters@gmail.com with any questions, comments, or concerns you might have. We appreciate all feedback, comments, and especially your questions. Don't be shy!)

What's That Mean?! (A-N)

You know how sometimes you see some letters jumbled together, and they just don't make a single bit of sense to you? Well, maybe this list of acronyms and abbreviations will help.

A.B.A.—American Bar Association

ALTA—American Land Title Association

A.P.R.—Annual Percentage Rate

ARM—Adjustable Rate Mortgage

BAPCPA—Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

BPO—Broker Price Opinion

CAIVRS—Credit Alert Investigation Verification Response Systems.

C.D.—Certificate of Deposit, see page

CDC—Community Development Corporation.

CMA—Comparative Market Analysis

C.P.M.—Certified Property Manager

C.T.A.—Cum Testamento Annexo (with the will attached. See Administrator C.T.A.)

CRV—Certificate of reasonable value.

DBA—Doing Business As.

DOM—Days on Market, see page #??

ECOA—Equal Credit Opportunity Act

EEM—Energy Efficient Mortgage

EIC—Earned Income Credit

EPA—Environmental Protection Agency.

ERTA—Economic Recovery Act of 1981.

FDC—Fair Debt Collection law

FDIC—Federal Deposit Insurance Corporation

FHA—Federal Housing Administration

FHLMC—Freddie Mac

FICO—See credit score.

FIS—Foreclosure Intervention Specialist

FSBO—“For Sale by Owner”

FTC—Federal Trade Commission

GFE—Good Faith Estimate

GNMA—Ginnie Mae

HECM—Home Equity Conversion Mortgage

HELOC—Home Equity Line of Credit

HOEPA—Home Owner Equity Protection Act--

HUD—Housing and Urban Development

HUD-1—See Settlement Statement.

IRA—Individual Retirement Account

LIHEAP—Low Income Home Energy Assistance

MERS—Mortgage Electronic Registration System

MIC—Mortgage Insurance Case Number

NAR—National Association of REALTORS

NSF Fee—Non-Sufficient Fund Fee. See Return check fee.

If you have any questions about these, you should always feel free to leave us a comment, or e-mail us.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of Acronyms and Abbreviations like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)