Every residential property owner is familiar with the too good to be true offers that are always coming in the mail, especially when rates have fallen. Most of these solicitations are based on county records that show the owner of the property and other information that a predatory lender can utilize for the magic mortgage offer. Whenever I need a laugh, I look at these offers, which always turn out to be either bogus or not applicable for the borrower. What the mail offer mortgage brokers are doing is trying to get the phone to ring so they may bait and switch.

Among the many deceptive practices are claims an association with Government agencies, telling the borrower they are pre-approved for a loan, and of course, great rates. Veterans Administration (VA) and Federal Housing Administration (FHA) mortgage offers in particular are often designed to create the false impression that the offer is being made, guaranteed, endorsed, etc. by the Federal Government. Telling borrowers they are pre-approved for a mortgage, with little or no income or credit requirements, is another ploy to bring in the naive. Trust me, the mortgage industry has changed and your credit scores, verifiable income, will be examined. For a borrower to be legitimately pre-approved these factors need to be known.

As for those wonderful rate quotes, which seldom mention the fees that will be charged, look at the size of the loan, AND the amortization period for the new loan. When most borrowers hear about a fixed rate mortgage they assume it will be for a thirty year term. Most of the mortgage mailers I have seen recently are for mortgage amounts of at least $350,000 and those great mortgage rates are based on a amortization of ten or fifteen years. While the rate is a lot less on a ten year mortgage, the monthly payment will be more than twice the payment for a thirty year mortgage. The reason the loan amount is important is that the bigger the mortgage, the better the rate, unless the loan amount is over $417,000 which calls for a “jumbo” loan with a higher price. The reason for this is simple: it takes the same amount of effort to originate and service a $350,000 mortgage as it does a $75,000 mortgage.

The way to get a good deal on a mortgage is simple: ask your real estate agent. They should know who delivers. While there are few absolutes in the mortgage industry, one thing I have noticed is that I have never seen a borrower get a good deal from a offer they received in the mail.

Charles A. “Chip” Allen

Crestline Mortgage Bankers

A Division of Universal Lending Corp

Direct: 303.947.2109

Fax: 303.987.0676


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