- The Washington Times - Thursday, October 20, 2005

Q:Six weeks ago we applied for a fixed-rate mortgage to refinance our adjustable loan.

We found the best rate on the Internet and submitted our information online. We received a lot of forms to sign and sent them back with some financial documents.

I have not heard anything, and no one seems to return my call or answer my e-mails. Rates are going up, and I’m afraid that I might not get the rate I originally wanted. Any advice?

A: I’m not sure what you can do except persist in trying to speak with someone at the mortgage company and file a complaint with the state regulator. It sounds as if you picked a mortgage company that’s near the bottom of the barrel.

From your e-mail, I can’t tell how much you know about the loan for which you applied. Did the loan officer lock the interest rate? If so, for how long? In the paperwork that was sent to you, was there a rate lock-in form that specified the terms of the loan? What about points and closing costs?

When you say that you “found the best rate” on the Internet, how do you know?

Let me give you a quick checklist of things you need to be certain of when making a loan application.

• Don’t get sucked in to a seemingly low rate without knowing the total costs involved. Remember, the lower the note rate, the higher the points and closing costs.

In Virginia, closing costs without points on a $300,000 loan typically run about $3,300. Since one point is equal to 1 percent of the loan amount in cash, paying points is usually not a great idea. Recognize that an interest rate quote is completely meaningless without knowing the costs involved.

• Obtain a copy of a detailed Good Faith Estimate of Closing Costs. Ask the lender or broker for which fees it is directly or indirectly responsible. These include such items as the appraisal, credit report, processing, underwriting and document preparation.

Any reasonable mortgage broker or lender should be able to guarantee in writing that these fees will not exceed a certain amount. Other fees are completely out of the lender’s control, such as county recording fees, title insurance and settlement agent fees. I would hope that any loan officer with a drop of experience should be able to give you a reasonable estimate of these charges. If you lack confidence in him, it might be a good reason to cancel the application.

• Make sure your interest rate is locked for a period that’s long enough to get your application processed, approved and closed. Without a rate lock, the interest rate can rise. A minimum lock time should be 30 days.

I’ve seen Internet companies advertising unusually low interest rates. After a bit of prodding, I find that the rate quoted is only good for a 15-day lock, which is usually not long enough to close the deal. The rate quote is therefore meaningless.

• Most important, choose your lender or broker wisely. Several good Internet companies might be available, but if you are not receiving immediate and up-front information, seek out a different broker or lender.

A good loan officer will assess your situation, help establish your objectives, and make a recommendation of the type of mortgage product that best fits your financial picture.

If you are inexperienced in these matters, you will save a lot more money in the long run by choosing a good loan counselor than jumping at some low “bait and switch” interest rate quote.

Henry Savage is president of PMC Mortgage in Alexandria. Reach him by e-mail (henrysavagepmcmortgage.com).

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