Real Estate and Home Mortgages - What happens if loan is sold??

Hi,

I am in the process of deciding on whether I should use a bank or broker for my refinance. The bank tells me that eventhough the broker my offer a lower rate, the loan will be sold possibly several times and I won't be guaranteed that the rate/terms won't change. Is it something common that once my mortgage is sold, the rate would go up??

Thanks,

sweetboy

I have never heard of this.

Once your loan closes and you've agreed, signed and closed on the rate and terms, it's set. If a loan is sold, you should be notified of who the new lender is. They can't just change rate and terms on you whenever they want.

Perhaps they're talking about a quote...BEFORE the loan closes?

I'd use whichever one would give me the best deal! As far as I know [not an expert] the only thing that happens when your note is sold is; you send your payment to a new address/lender. The account # may or may not change.

Since it is usually in the lenders best interest to make the loan, one might make derogatory comments about the other to convince you to go with them.

As agreed. What I hear a lot of times is that you'll get a quote, loan documents are drawn and it's nothing like what you're quoted. Make sure you get a good faith estimate.

If the loan is sold, the terms do not change. You have the terms in writing at your closing. The only thing that may change (loan-wise) is who you send your money to. Your mortgage is not selected to be sold individually, it's sold in a batch with other very similar loans. If this is an ARM, it's going to change anyway at some point, but not due to being sold.

Even your local bank will reserve the right to sell off your loan.
When you get your disclosures, you will have a servicing disclosure. It shows the percentage of loans that institution has sold off for each of the last 3 years. For instance, as a mortgage banker, mine shows 100% sold off for each year. A local bank might show 25% sold off. If it says 0%, then they do not sell off the loans to date (other than how I describe later here) although they could start.

With big banks swallowing up smaller banks so much these days, I'd venture to say that if you close with a smaller bank you're just as likely to have servicing transferred at some point than if you go with a mortgage banker or broker who will immediately sell off the loan to a large servicer. Many small banks and credit unions actually function as brokers, not carrying any of their own loans.

"The bank tells me that eventhough the broker my offer a lower rate, the loan will be sold possibly several times and I won't be guaranteed that the rate/terms won't change."

This is the sign of a person that doesn't know what they're talking about. I'd go elsewhere before giving in to scare tactics from someone that is ignorant of the process.

The best thing to do is to shop around, in one sitting (at one time), calling multiple banks, brokers and mortgage bankers to compare rates AND fees.

It's important to note that all loans are sold off in some fashion. The days of George Bailey (It's a Wonderful Life) lending out money people have saved at his Building and Loan are long gone. That lesson was learned a long time ago, as George got a taste of on his wedding day. ;)

Loans are underwritten by guidelines established by Fannie Mae, Freddie Mac, Ginnie Mae etc so that they can be GROUPED by risk and loan strength. These loans are sold off in strips on Wall Street. This is how your bank has money to lend out. If you borrow 100,000 they would have to wait 13 years before they started making ANYTHING on the loan. That would quickly put them out of the mortgage lending business. Loans are sold off to investors so that lenders get an immediate return and can continue lending.
In short, you loan is going to be sold in some fashion no matter what. ;)

"If I go to different banks to get quotes and they run my credit, will it hurt my credit score??

sweetboy"

Selling the loan typically means selling the servicing rights to the loan. It merely means that you'll be making your payments to another company. It may not ever happen to your loan; yet again, it might happen several times during your loan's thirty-year life. You get a letter saying, we're writing to inform you that your loan as been sold.

Read more
http://www.nocommerciallinks.com

I have an application from a broker that has an offer and they say that all the closing costs will not exceed $2500, which seems pretty good compared to everyone else that I have spoken with. The only other fees they said that I would have to pay for is any mortgage interest that I have with my current loan and any property taxes that I may owe. Does this seem true?? Or do you think they are going to spring something else up on me later??

Thanks,

sweetboy

That sounds reasonable to me.

I don't know what "application" they gave you but have them do a good faith esitimate for you. That will break down the fees and you'll be able to see what they are for.

The other fees they're talking about are prepaids. Basically, they're recurring costs such as taxes, insurance and interest.

"If I go to different banks to get quotes and they run my credit, will it hurt my credit score??

sweetboy"



You should be getting quotes *without* applying.
It helps to have your own credit report to know that everything is ok, no delinquencies in the last couple of years, and knowing your scores can help--BUT know that the scoring model used by mortgage lenders is different that used by car dealers, credit cards, and certainly consumer level scoring. It'll still give a general idea though.

Most often, rates aren't affected by score unless below a certain level (low 600's) although some lenders do tier their offerings. Just call around, tell them to assume your scores are fine and get quotes for common qualifying borrowers. If they insist on an application, go elsewhere.

Having 5 different mortgage lenders pull your credit within 2 weeks doesn't affect your score. You have a right to shop for loans. Beyond that, each hit will affect your score some. To shop for a loan, however, you do not need to apply or have credit pulled.

*Know that if you apply for a mortgage, a credit card, a furniture loan at the same time EACH of those WILL affect your score. Those are all different types of lenders, so they do not constitute shopping for a loan. Different types of lenders will each hit your score some. So get the mortgage finalized and closed before getting any other pulls on your credit. Additionally, if another credit report is pulled prior to closing (the underwriter can pull if they want to) and these other inquiries now show, you will either be documenting these loans (increasing your debt load, maybe endangering your approval) or at least have to document that you did NOT take out a loan, credit card etc.


Sweetboy: sorry, I replied in your post as an edit instead of hitting the quote button. Time for new glasses!

If I already paid a lender an appplication fee and I decide not to go with them after all, am I entitled to a refund of the application fee??

Thanks,

sweetboy

You shouldn't have paid the application fee to begin with. :o Sorry! It's non-refundable. Next time anyone asks for an upfront application fee say "No thanks". The reason why they ask for an application fee to be paid upfront is b/c time is money. They don't want to put in a lot of time into a potential loan and not get paid for it if you decided to walk out.

Depending on how much that fee was, it could have been used in processing the loan: credit report, automated underwriting submission(s), associating the credit report FOR the automated submissions...there are plenty of behind the scenes fees in working a loan for approval that most people know nothing about. Many of us don't charge for this up front, but it's understandable that some do charge $50 or so to cover that--as long as they don't charge for it again at closing. Especially if they don't have a high percentage of applications that become closed loans.

The problem comes when a lender charges a high fee to "apply" but it's actually just to get you to invest money in them so that you won't go elsewhere. Even though staying there may cost the borrower a lot more in the long run, some borrowers feel they can't walk away if they've paid the lender $100 up front. In a case like that, it's a mind game designed to obligate borrowers to stick with a poor lender.

Always shop around without paying fees and without applying. If a lender can't give you basic information, cross them off the list and move on.

Regarding having the appraisal done, I was in the process of re-tiling my game room and I pulled up all of the vinyl tile that was there and bare concrete is showing now. I am going to tile the floor with creamic tile, but I doubt that I will get this project done before the appraisal is done. Will this be a huge mistake??

Thanks,

sweetboy

Any appraisal will reflect the CURRENT value, which will likely be less with a bare floor than it was with the old vinyl. It would be better to wait on the appraisal until your done with the work - if that's an option :D

You need to get the floors done, or learn how to stain concrete to make it look intentional. ;)
The appraisal would reflect as "subject to flooring completion" or something to that effect, which would *probably* stop the loan until it's complete and inspected again by the appraiser to clear it. Flooring isn't a huge factor in the value of the house, but it does have to be there. Being a refi, you might get away with it, but best to count on it being an obstacle. Have your loan officer actually ask the underwriter. I've recently had a refi go through while work was being done on a bathroom walls, but peeling wallpaper is a far cry from missing flooring. This isn't so much an issue about value as a missing component of the house itself.

You should be getting quotes *without* applying.
It helps to have your own credit report to know that everything is ok, no delinquencies in the last couple of years, and knowing your scores can help--BUT know that the scoring model used by mortgage lenders is different that used by car dealers, credit cards, and certainly consumer level scoring. It'll still give a general idea though.

Most often, rates aren't affected by score unless below a certain level (low 600's) although some lenders do tier their offerings. Just call around, tell them to assume your scores are fine and get quotes for common qualifying borrowers. If they insist on an application, go elsewhere.

Having 5 different mortgage lenders pull your credit within 2 weeks doesn't affect your score. You have a right to shop for loans. Beyond that, each hit will affect your score some. To shop for a loan, however, you do not need to apply or have credit pulled.

*Know that if you apply for a mortgage, a credit card, a furniture loan at the same time EACH of those WILL affect your score. Those are all different types of lenders, so they do not constitute shopping for a loan. Different types of lenders will each hit your score some. So get the mortgage finalized and closed before getting any other pulls on your credit. Additionally, if another credit report is pulled prior to closing (the underwriter can pull if they want to) and these other inquiries now show, you will either be documenting these loans (increasing your debt load, maybe endangering your approval) or at least have to document that you did NOT take out a loan, credit card etc.


Sweetboy: sorry, I replied in your post as an edit instead of hitting the quote button. Time for new glasses!

Question about credit scores, do consumers ever have access to the same type of credit score that mortgage lenders will pull (other then when a mortgage lender tells you)? I just got credit scores from all three credit bureaus (by going to the myFICO site and paying the $47 for the "FICO Standard" product) and they were all in mid-700s so I thought "great I can demand excellent rates for my mortgage". However I have only had credit cards for about 5 years total and no installment loans whatsoever so I am scared that my "mortgage scores" could be dramatically lower. Is this fear unfounded? Is the site mentioned a reputable, useful site for people looking into mortgages?

Thanks!

A FICO score is a FICO score. There's no difference. There's no such thing as a Mortgage Score. ;)

Actually, there are MANY different scoring models. They all take into account your CREDIT, not just certain types of credit. They may put some weight on different types of trade lines, but you don't need to worry about that.
A consumer score is different than that received by a credit card company, which is different than one for auto lending which is different than one I receive in mortgage lending.

You only have access to your score as a consumer. It will be close though. I'll look to see if I have an article on it. If I find it I'll post it here.

People place too much importance on the credit SCORE. If your credit history is clean, that's what is really important. I've seen a 700 score that could not get a conventional mortgage. I've also had a 580 fly through just fine. There are a lot of factors in mortgage lending, it is not as score driven as credit cards, auto finance...there are many factors. Score may be important with SOME lenders to get their best rates, but it is not a huge difference in most cases. There may be a minimum score for a certain program though. Don't worry too much about scores, just keep your history in good shape.