TOP 5 IN REAL ESTATE NETWORK, April, 2009-We all love closing day-the day when sellers breathe a sigh of relief, buyers eagerly anticipate moving into their new home, and we collect our commissions. Unfortunately, many homeowners are now looking back at their closing day with regret. To them, closing is a painful memory of the day they got saddled with an unaffordable mortgage. As their agent, you may not have been responsible for sticking your clients with an unaffordable mortgage, but you can do more in future transactions by educating clients on how to become savvy and responsible borrowers.
One of the best ways you can protect clients is to help them establish a relationship with an ethical and knowledgeable loan officer or mortgage broker for home financing advice. I also offer the following tips to share with home buyers and any current homeowners who are looking to refinance:
- Know your credit score and history. Consumers are entitled to one free credit report per year from each of the three credit reporting agencies. They can order a free credit report at www.AnnualCrediTreport.com. Your clients may also obtain a credit report from their bank or mortgage broker, who should also be able to tell them their credit score (which may not be included in the free report). They should do this prior to shopping for a loan and find out which interest rates are typically offered to people with similar credit scores.
- Know that a good credit score (generally 700 or higher) qualifies borrowers for the lowest interest rates available and for lower costs and fees.
- Find out what the lender is giving for the points it’s charging. If three points only buys a .125% rate adjustment, think twice about paying points.
- Comparison shop carefully for a loan. Compare costs, fees, and interest rates from multiple lenders. Get quotes from two or more reputable mortgage brokers, to make sure they’re reputable.
- Find out up-front what fees and costs are non-refundable if the transaction is not completed.
- Have the lender itemize every cost and fee and explain them. If any fee has a strange, generic, or “all-encompassing” name, ask to have it explained or itemized.
- Try to negotiate every expense – many costs and fees are fully negotiable.
- Consult a reputable real estate attorney for advice on financing and have your attorney review all documents before signing them.
- Request a copy of all documents you’ll be asked to sign at closing at least 1 week prior to the closing date. Make this request in writing and keep a copy for your records.
- Read the closing documents word for word, and make sure you fully understand everything you will be agreeing to. If you don’t understand something or don’t agree with it, consult your attorney. Do not wait until closing day to bring up your concerns; deal with them immediately.
- Make sure the documents on closing day are identical to the ones you reviewed prior to closing. (It’s okay if your interest rates and closing costs go down, but if they are more than what you agreed to, find out why. If you don’t receive a reasonable and satisfactory explanation, then insist on having the items in question corrected.)
- Ask questions about everything you don’t understand.
- Get copies of everything you sign at closing and demand that whoever is the authorized signor for the title company or lender also executes the documents. The documents in your closing package should include all parties’ signatures, not just yours, and not copies of unsigned documents.
- If you’re purchasing, ask for a marked-up title commitment showing that the title company acknowledges having completed each item it is responsible for. This helps protect against items that might get recorded in the gap-period (the time between closing and when the documents are recorded with the county). It’s just one more layer of protection to you, the buyer, that you’re receiving clear title.
- Do not get rushed at the closing table. Take time to compare the documents you reviewed prior to closing with those presented at the closing table, ask questions, express any concerns, and make sure any issues are addressed to your satisfaction before you sign anything.
Attend the closing and encourage your clients to have their loan officer attend the closing, as well. This can make your clients much more comfortable and confident that the closing is handled properly and that their rights are being protected.
I know from a Realtor’s perspective that when attorneys get involved, they often make waves in a no-wake zone, but you can do your client a favor by suggesting they use an attorney to review their documents prior to closing. This will also make you a better representative in the future as it enhances your credibility and allows you to understand some of the common issues the attorney points out. You may then be able to proactively head off problems before they become an issue at closing. Both your client and their attorney will be thankful.
Leading up to the mortgage meltdown, we were a little too cavalier about closing. A booming economy and soaring property values masked the underlying problems. If homeowners got stuck with a bad loan, they could always refinance out of it… or so we thought. Moving forward, we all need to be more careful, to pay closer attention to detail, and to serve the best interests of our clients. After all, they are the ones signing our checks and the ones we depend on for future business.
Ralph R. Roberts is a consumer advocate, spokesperson for Federal Loan Modification Law Center, host of KeepMyHouse.com, and author of numerous books, including Foreclosure Self-Defense For Dummies and Loan Modification For Dummies (Summer, 2009). Ralph is based in Sterling Heights, Michigan and can be reached at RalphRoberts@RalphRoberts.com.