Ask Our Broker with Peter G. Miller
By Peter G. Miller
CTW Features
Question: I went to a closing recently and it was a miserable experience. I expected a 3.5 percent rate but wound up with 4 percent. The lender asked for the same paperwork several times. I did not seem to get any benefit from a credit score that was well above 800. Lastly, my mortgage was sold to a major lender I greatly dislike. How can I do better with my next home purchase?
Answer: Some of the problems you describe are actually resolvable, but some are not. Let’s take a look:
First, your interest rate rose because it was not locked in. Unfortunately it appears you applied for a mortgage during the first major interest rate hike in years. The rate for fixed-rate 30-year prime loans went from 3.42 percent on Sept. 2 to 4.30 percent on Dec. 22, according to Freddie Mac. That’s a relatively huge increase in a short period.
Second, lenders asking for the same paperwork several times seems to come up with some frequency. My guess is lenders are checking and rechecking to avoid errors and the possible financial penalties mistakes can generate.
Laurie Goodman with the Urban Institute said, “Only the best borrowers are getting loans today and these loans are so thoroughly scrubbed and cleaned before they’re made that hardly any of them end up going into default.”
Third, your credit standing was a huge benefit, a part of the reason you paid 4 percent for mortgage financing and not something higher. For instance, a score below 760, which itself is a very good score, might raise your rate by .25 percent.
Lastly, your loan was sold and you dislike your new mortgage servicer. The good news is this: The new lender cannot change any terms of the mortgage agreement. Moreover, it’s very possible your loan will be sold and re-sold several times during the life of the mortgage, so perhaps it will end up in the portfolio of a lender more to your liking.
In each case the mortgage is an asset owned by a lender. The lender can keep the loan or sell it to raise new capital. Loan sales are deals between mortgage owners and mortgage buyers — borrowers are bystanders. As a borrower you have a number of protections, which require the new mortgage owner to meet certain standards in terms of when to credit your payment, maintaining an escrow account, etc.
The next time you buy a home, consider locking in rates if you think interest rates will rise and keep copies of all the documents sent to the mortgage processor, just in case they ask for them more than once.
© CTW Features
Peter G. Miller is author of “The Common-Sense Mortgage,” (Kindle 2016). Have a question? Please write to [email protected].