Mortgage-Refinance Treachery: Avoid Mortgage Bankers and Brokers Biggest Trick -- The Sales Pitch

What the average homeowner or home buyer fails to realize is that bankers, loan officers, mortgage brokers, or whatever your lenders call themselves, are salesmen. Certainly, if you purchased your home from a realtor and used her lender, you most likely got a feeling of trust in that person, because the realtor referred him. Beware of this potentially dangerous water. "This guy will help you complete your loan," the realtor will tell a prospective buyer. "He'll help us close quickly, and you'll be in your new home in less than a month."

Suddenly, the banker is a guy who will help you. Now, he's your friend. The intention here is not to scare you into thinking that everyone in the mortgage business is a bad person, looking to rip you off, but don't trust this guy, just because a realtor sends you to him. Remember, they work together.

The realtor needs the sale, and the banker needs to make loans. They are both salesmen, and salesmen are people who make commissions, based on a particular price. This goes for loan officers, just the same as it goes for a realtor or a car salesman. That used car salesman makes more if you pay more, and the mortgage banker makes more, based on how high your interest rate is.

When I worked in the mortgage business as a full-time loan officer and sales manager, the average customer was far more concerned with the costs of completing the loan and the final monthly payment than with the interest rate on the money they were borrowing. This is one of the biggest mistakes home buyers and people refinancing make in completing a home loan.

Unfortunately, most Americans live from one payday to the next, barely paying the bills, so all they're concerned with is what the monthly payment will be and if it will fit their budget. Bankers feed off of this, as it becomes easy to simply fit a loan into a payment schedule, ignoring interest rate, altogether. In fact, most people make it easy on the mortgage broker, asking more questions about payments than about interest rates.

The unsuspecting borrower will say, "I can't pay more than $1,000 per month." The cunning loan officer will feast on this person, like a starving man at a Thanksgiving dinner. Remember, bankers and mortgage brokers keep secrets, advising in ways that appear to save you money but really cost you thousands in the long run.

Let's assume the previously-mentioned person needs $100,000 to purchase a home. An unscrupulous mortgage broker, looking to make as much money as possible on the borrower will find out how much the taxes and insurance will be on the property. Let's assume they are $230, which will be added to the person's monthly mortgage payment. Let's also assume that the market bears an interest rate of 6% for a 30-year fixed rate mortgage (more on terms later). Now, the mortgage broker says to the borrower who can only afford $1,000 monthly, "What if I get you into your house for less than $900, including taxes and insurance? Can we do the loan today?"

This person, dying for his chance at the American Dream, is going to jump at this, thinking the mortgage broker is his new best friend and ignoring the interest rate on the loan, altogether. What the broker, trying to steal every possible cent from this one deal, has done is sold the borrower a $100,000 loan at an interest rate of 7%, which creates a principal and interest payment of $665.30 monthly. Combine this with $230 in tax and insurance escrows for a monthly mortgage payment of $895.30, almost $105 less than what the borrower said he could afford - a pretty nice savings, the borrower will think.

Think about it; if you said you could afford no more than $1,000 per month, and the person, in whom you placed your trust, told you your payment would be $895, you'd probably be pretty excited, huh? What has really happened, though, is the mortgage broker has done the borrower, his valued customer, a great disservice. Why, you may wonder. Because the market for this model bears an interest rate of 6%, and we're assuming the borrower has good credit. The loan officer could have offered the far better 6% rate, which would create a payment of $829.

This is $66 less than the borrower's payment at 7%. Also, the 7% rate will cost the borrower an extra $792 each year ($66 times 12 months). That is nearly $4,000 over five years! All this, just so the mortgage broker could pocket a few hundred dollars more on this one deal. If the loan amount was much higher, you could lose tens of thousands of dollars in just a few years.

So, what is the big secret? Simply put: bankers and mortgage brokers do not always offer the best possible interest rate, because they make money, when you get a higher interest rate than the market bears! So, be careful of this old trick. Tell your mortgage professional that you want the Par rate. This is the best rate the lender is willing to offer on a given day, without charging a premium. In other words, you could get a better rate, but you'd have to pay to get it. Now, if you are caught off guard and sold a rate that is greater than Par, your payment will be bigger and the loan officer will make extra money. Don't let it happen.

Mark Barnes is the author of the new novel, The League, the first work of fiction, based on fantasy football. He is also an investment real estate and home loan finance expert. Learn more about his suspense thriller at http://www.sportsnovels.com. Get his free mortgage finance course at http://www.winningthemortgagegame.com

---

Home Mortgage Loans For People With Bad Credit - 3 Ways To Improve Your Chances For Getting Approved

Finding home mortgage loans are a reality for people with... Read More

Home Buying ? What Can You Afford?

Okay, you've decided to buy a home and are trying... Read More

Zero Down Payment Mortgage ? Can It Be Done?

"I've been renting for years now; I've always paid my... Read More

Home Loans

Buying a home remains the great American dream. Home ownership... Read More

Reaping Financial Rewards ? Bad Credit Home Equity Loans

Home is the place you inhabit. It is the place... Read More

Mortgage ? What, Why, When, and How?

What is a mortgage? Here's what The New Merriam ?... Read More

Mortgage: Rehabilitation Of Financial Helplessness

The term 'mortgage' is assumed really controversial by people when... Read More

Looking for a Bad Credit Home Improvement Loan

To make needed repairs to your home without the advantage... Read More

Uk House Price Increases Take A Summer Holiday

Property website Rightmove has released its latest house price index... Read More

Types of Home Equity Loans

There are at least two types of home equity loans.The... Read More

Home Equity Loan Improvements

There's more Regulation Z compliance on the way, courtesy of... Read More

Before You Buy

Before you start looking for a home, figure out what... Read More

Jumbo Mortgage Loans - Getting Approved for a Jumbo Mortgage Loan Online

Getting approved for a jumbo mortgage loan online is similar... Read More

Mortgage Debt Elimination

The prospect of mortgage debt elimination is something that many... Read More

Choosing a Real Estate Agent

Before you go looking at houses, you'll need to find... Read More

Securing a US Commercial Mortgage

What's the most efficient way to secure a US Commercial... Read More

Subprime Mortgage Lenders - Helpful Tips When Getting a Subprime Mortgage Loan

If you have bad credit history, no down payment or... Read More

Home Equity ? Let the Market Eliminate Your Private Mortgage Insurance

In decades past, most people who were interested in obtaining... Read More

Carolina Mortgage Loans

You're selling your home and are looking to relocate to... Read More

Stop Foreclosure - 7 Tips to Save Your Home

Faced with the threat of a foreclosure on their home,... Read More

Home Buyers Face Decisions that Affect Their Long-Term Financial Picture

Taking the step for prospective home buyers.into home ownership is... Read More

Home Equity Line of Credit or Second Mortgage Loan Online - Things To Do With Your Homes Equity

If you are wanting to get a home equity loan,... Read More

Understanding a UK Commercial Mortgage

In many ways a commercial mortgage is just like a... Read More

Why You Should Not Get Hung Up on the Interest Rates!!

This is what a mortgage can do for you!AND Why... Read More

Mortgage Information

A mortgage is borrowing money using property as a security,... Read More