We are first-time home buyers who don’t have a clue how to get a mortgage. But you constantly suggest getting preapproved for a mortgage before shopping for a home. That’s what we tried to do. We started with our bank where we have our checking account and two CDs. They treated us like we just walked in off the street, although I’ve been a customer there over seven years. The loan officer gave us a loan application to fill out and bring back. We did. She didn’t even bother to explain the loan program alternatives available. When we brought back the form a week later, she said it would be processed and she would let us know.
After a week, we didn’t receive any phone call, so I called the loan officer. She called me back and said we only had a “FICO score” of 680, so that limits our mortgage choice to an adjustable rate mortgage. We got preapproved for an adjustable mortgage, but not a fixed-rate, which is what we want. Is 680 really a bad FICO score? Do you think we should try another lender? This is a major nationwide bank that treated us so badly.
A–There is no excuse for the way you were treated. The best lenders provide loan approvals within 24 hours. Some Internet lenders take less than one hour.
Your 680 FICO score is very good. Anything above 620 is considered good, and over 700 is excellent. I suspect your bank is trying to take advantage of you as first-time buyers so it can make an adjustable-rate mortgage. I’m glad you didn’t fall for the trick.
In today’s very competitive mortgage market, with the interest rate difference between fixed and adjustable-rate mortgages less than 1 percent, you will be far better off with a fixed-rate mortgage if you plan to keep your home for more than five years. If interest rates plummet, you can easily refinance, provided your mortgage doesn’t have a prepayment penalty.
Don’t do business with people who don’t treat you right. Go down the street to another mortgage lender. Explain that you were preapproved but want to get preapproved for a better fixed-rate mortgage. With your good credit score, that should be no problem. If I were in your situation, I would close my accounts with my current bank and switch to one that preapproves a good mortgage.
Q–We recently bought our home. When it came to buying fire insurance, we phoned the agent who has our auto insurance policy. She inspected our house, measured it, photographed it and estimated its replacement cost for our homeowner’s insurance policy. We bought the policy and paid the premium.
Now, a few months later, our mortgage company says we don’t have enough insurance. They say we must insure for the amount of our mortgage. That would mean increasing our fire insurance policy by about $75,000. Much of the value of the home is in the land value because it is on a one-acre lot. Our insurance agent refuses to increase our coverage; she says the law prohibits overinsurance. Our mortgage lender is threatening to force us to buy the lender’s very expensive policy. What should we do?
A–Your insurance agent is correct. Many states have laws prohibiting overinsurance because it encourages arson.
Ask your insurance agent to phone the mortgage representative who is demanding that you increase your fire insurance policy limit. That lender needs some education. If necessary, your agent should write a letter to the president of the lending company asking him to stop its employees from demanding overinsurance. I hope your lender is just misinformed and is not trying to force you to buy overinsurance from the lender’s subsidiary at an inflated premium.
Q–About two months ago, we sold our home. Our real estate agent earned a 6 percent sales commission, which she split with the buyer’s agent. We paid was almost $15,000 in gross commission. On top of that, our agent charged us a $250 documentation fee and a $44 multiple listing fee at the closing. That really irritated my husband. We reluctantly paid it because we wanted to get the sale closed. Is it customary for realty agents to charge fees on top of their sales commissions?
A–No. Unless those fees were disclosed to you in the listing contract you signed, that agent is not entitled to receive those outrageous fees on top of her commission.
Demand a refund. If you don’t receive it promptly, take the agent to small-claims court. Unfortunately, yours is not the first letter I’ve received about listing agents who think they should receive more than their sales commissions.
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PLEASE NOTE: Real estate laws vary from place to place. Be sure to check the laws of your state and municipality before making decisions on real estate matters.
Write to Robert Bruss at Tribune Media Services, 435 N. Michigan Ave., Chicago, IL 60611.
