Too late the hero

Regrets of not checking with different lenders prior to signing Loan Documents.
Ken Go (888) 822-5363

JR – I was referred to by a previous client of yours, here is my current scenario. I have been trying to get a second mortgage to finish my home improvement project that I started about 3-4 months ago. I finally got a lender from a flyer that gave me these pricing quotes: 11.99% second mortgage with a 617 credit score, a combined Loan to Value of 90% and a total loan cost of $7,000.00 with no prepayment penalty. I have just signed but have three days right of recession to cancel this loan. I had a time share that went into foreclosure about two years ago but just got report less than 6 months ago on my credit. Am I getting a descent loan?

Ken Go - Immediately, I got all the information needed to see if my sources would be able to offer a better deal for JR. I have only three days to guarantee an approval and a rate. After my interview with JR, I know I have some qualifying issues; I then turned to my underwriter for a full loan approval. This loan was submitted the second day, I got the escrow and title insurance open within a day and I used his old appraisal from another lender to complete my file. Unfortunately, it was the end of the month and underwriters are always trying close existing loans, my file was delayed on the approval. Spoke with JR, he needed to close because his project was held up long enough, apparently he has been delayed by about three weeks already. Due to his situation I am not allowed to guarantee my rates and fees to him.

The fourth day, my full approval came in with rates of 8.50% and a total cost of $2,400.00 and no prepayment penalties. He could have saved at least $5K just on the cost of the loan, not including the rate difference. So I called JR, but it was too late. He realized that he made a mistake and told me that he will definitely learn from this and make better choices next time. BTW, he also just told me that after reviewing the signed documents, his loan had a prepayment penalty which was contradictory to what was sold to him.

RP – This caller is a previous client who specifically requested for me to write about her experience. I would like to cash out some money from my equity; you give me a very good rate of 5.5% on my first mortgage. But I needed to pay for my children’s education and needed to pull money out again. However, someone referred me to call another lender who said they could refinance my entire loan to a 5.625% first mortgage with the same amount of cash out I needed.

Ken Go – my suggestion for her is not to touch the first mortgage due to the existing low mortgage rate they currently have, the rates where about .50% higher to refinance to a new first. I told her to go ahead with the lender referral but be careful and not to pay anything upfront until she got a full loan commitment in writing. I said if they are that low, call me back for me to refer them to my callers. She then insisted that this person can really give her those rates and that this person promised her.



She called me back after one week and told me that the loan commitment came at 6.5% and the cash out amount was 25% less than what she needed. She told me to go ahead with the process and now we are signing loan documents.

JC - I closed escrow on a house last October and am currently having problems with my payments. Everything went so fast at closing my agent/lender (one person) kind of talked me into closing and promised that homes would go up and I would refinance this loan to a lower payment. Our combined income is about $7K but this loan payment is almost $4K fixed for one year then turns into an adjustable. I have other expenses and bills that I needed to pay too. I called the agent to see if he could refinance my loan, but he told me to wait till next year because of my prepayment penalty on this loan.

Ken Go – Refinancing should not be your option, lets do the math together you have a 650K loan amount, you are only paying interest only now at 6.5% on your first and a fully amortized loan on the second. You are already having difficulties paying that loan balance, if you were to refinance you would have to add the cost of the loan and the prepayment. Even if you would reduce the rates by .50% (which you can’t) your payments will actually go higher. Here are your options: cut your expenses, reduce your cost of your utilities, and re-amortize your auto and credit card payments to a longer term. If you do that, you have just increase your interest payments by another 10-20% and you would really just worked for your mortgage. The smarter way is to sell; you have a little bit of equity that will cover the cost of the prepayment penalties and an agent. Re-organize yourselves and buy at a later time and make sure you get a fixed term payment that you can afford.

Lenders are feeling the pinch now a day and are starting to tighten their screws in this loan business. Don’t get me wrong, they still want to do loan but they will be pickier and will start to ask for more loan conditions. Open your ears and keep your eyes open, my advice to everyone about 6 months ago is that this market will cool down and we have to be very careful with our investments. Buy what you can afford, be realistic and forecast yourself three to five years from today and know where you want to be. Listen to the old timer sitting next to you telling you that back in their days, everything is on a cash basis. What you can’t buy with cash you won’t own. Don’t get carried away with credit cards, 0 down loans or 1% percent loans, they are illusions of money that you don’t have. This I can advise from the heart because I was once a victim of huge credit card debts and got beyond myself with them.

Please advise if you have questions, hopefully I will be able to help you in your next lending requirements. Call me at (888) 822-5363 or write to kennethgo@verizon.net.
Thanks for your calls, letters and emails.