Shopping for a Mortgage - Avoiding the Six Big Insider Tricks

They say that knowledge is power, and that's certainly true when it comes to the mortgage process. Often, your mortgage provider has an upper hand, because he or she knows a lot more about the process than you do.

Mortgage Broker, bankers, & lenders looking to compete with other providers for your business - yet still maximize their profits - can resort to a few common tactics. You need to understand the six insider tricks so that you'll know how to avoid them:

Trick #1: Blame it on the Underwriter

The tactic: Your initial good-faith estimate is often based on an automated underwriting process that can be completed in minutes. Once the loan process is underway, underwriters for the lender providing the mortgage take a closer look at the information you provide, your financial status and the likelihood you might default on the loan. Unscrupulous mortgage brokers might quote you a tantalizingly low rate up front to gain your business - and then blame it on the underwriter when your rates and fees go up.

The response: Try to get a file underwritten as early in the process as possible - at least two weeks before closing - so you're not pressured to accept higher rates at the last minute.

Trick #2: The Jump-the-Gun Rate

The tactic: Buyers who might be building a house might want to start the loan process months ahead of time. Some mortgage providers might quote an aggressive interest rate without locking in it - knowing that rates will likely change in that time.

The response: Get the rate locked in. There are rate locks available for six months. Typically you want to avoid any application handcuffs until you are ready to lock in your rate, or until at least 60 days out from closing get several quotes to recertify competitiveness.

Trick #3: The Secret Lock-in

The tactic: Some loan officers might lock in your interest rate without your knowledge, particularly if he or she thinks rates are heading up. This way, when rates go up, he or she can charge you the higher rate and pocket the difference.

The response: Keep records of who you talk to about rates and when. Get a written lock confirmation and check the date of the lock. Avoid any application handcuffs until you are ready to lock in your rate, or until at least 60 days out from closing get several quotes to recertify competitiveness

Trick #4: Non-refundable Handcuffs

The tactic: Some mortgage officers will charge you considerable, non-refundable deposit fees up front to ensure that you won't change providers later in the process. Or worse, they might require you to sign an agreement stating that if you close elsewhere transfer or even cancel your file, you might owe additional fees, charges, etc unscrupulous lenders could even post something like this on your credit report.

The response: Try to find lenders with minimal non-refundable fees.

Trick #5: The Lender Switcheroo

The tactic: A couple of weeks before the close of the loan, your mortgage officer might switch your loan to a lender with a lower rate - and then pocket the difference.

The response: Be suspicious if you're suddenly asked to submit (Sign new forms disclosures) significantly more information for the underwriter. Ask for a written lock confirmation, and if you see that they've switched lenders, ask your officer why and demand better terms.

Trick #6: The Big Float

The tactic: To ensure that you don't switch providers mid-stream, your mortgage provider might offer optimistic advice not to lock in your interest rate. If rates do go up shortly before closing, you are more likely to stay with the same provider rather than start over.

The response: Lock in your interest rate when you're satisfied with it.

Most mortgage providers are not out to get you, but it's always best to be on the lookout for tactics designed to maximize their profits.