- The Washington Times - Wednesday, April 18, 2007

Q:We are about to make an offer on a home. We will be offering $440,000 with a 20 percent

down payment.

When we spoke with the loan officer, he was vague in giving us rate quotes because our contract is not ratified. We asked him why we needed a ratified contract to get firm rate quotes, and he told us he couldn’t lock the rate until this happened.

Our problem is that we don’t want to end up ratifying a contract without knowing the specific terms of the mortgage. We don’t want to sign a contract blind. Can you advise?

A: If I were you, I would seek out another loan officer. Although some companies won’t allow you to lock in an interest rate until a contract is firm, there’s no reason why the loan officer couldn’t have given you a market interest rate quote with the caveat that the rate could change until the contract is ratified.

The primary job of a good loan officer is to help establish the clients’ objectives and match the clients with the best mortgage package that meets those objectives. It is the loan officer’s responsibility to ensure that the borrower has a complete understanding of the mortgage programs and costs involved.

Although small changes in the interest rate will change your monthly payment only modestly, it’s pretty important that you have a clear understanding of the details before you execute a contract. Your loan officer isn’t doing his job.

When folks call me to discuss financing for a possible home purchase, they are apprised of the following information after a mere 20-minute telephone conversation:

• A purchase-price range that falls within their comfort and qualification level.

• An accurate estimate of monthly payments in $10,000 increments within their purchase-price range.

• An accurate estimate of total cash needed to cover the down payment and closing costs in $10,000 increments within their purchase-price range.

• An itemization and explanation of standard closing costs.

• A review of mortgage programs, market rates and determination of the most suitable programs for the purchasers.

With this information, any prospective home buyer can then peruse the market, select a house and know with reasonable accuracy how much, in monthly payment and cash outlay, the property will cost.

When a formal loan application is made, here are two very important things your loan officer must automatically provide for you:

• An executed lock-in agreement. This form will guarantee the rate and points, if any, and specify for how long the rate is good.

Make sure the lock period extends to the agreed-upon settlement date.

• A good-faith estimate of closing costs. This form should give you an accurate estimate of the closing costs and should match the lock-in agreement as to whether or not points are being paid.

It should disclose any prepaid interest and escrow deposits for taxes and insurance.

It also should reflect the accurate loan amount and interest rate and provide a summary of how much you can expect to pay at settlement.

An accurate good- faith estimate will prevent surprises at the settlement table.

A good loan officer should be proactive in his explanations and welcome any and all questions from his borrower. If you are not receiving these services, there are plenty more who will happily help you.

Henry Savage is president of PMC Mortgage in Alexandria. Reach him by e-mail ([email protected]pmcmortgage.com).

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