Always check with trusted sources. Always check with experienced sources. Always ask a lot of questions. Never assume the person you are talking to has your best interests in mind. And…eat all your vegetables, wear clean underwear, and look both ways before you cross the street. Now you are all set with good advice for life. So what is my point to all this?
I was wondering how I lost a client the other day. I had eaten all my vegetables and had clean underwear on. But the mistake was on the client’s end it turns out. He had not checked with trusted and experienced sources.
I contacted this previous client about refinancing, and after some cursory back and forth, he said he had thought to call his current lender Wells Fargo. After talking to someone at their Customer Service Center at their 800#, he decided to proceed with them. We had not even talked details yet, and I wondered how a prior client whom I had a solid relationship with did not even check with me on final numbers before proceeding elsewhere. I then realized that with some people you need to soft sell and others you need to hard sell. And I am not a hard sell person, and this client needed to be sold hard and fast, for whatever reason, probably lack of time on the client’s part. He just wanted to be told details, what to do, and let’s get started…NOW.
So after a few days I checked in with him to have a candid conversation about this, and we realized not only was he not happy with his Wells Fargo experience after a few days, but he was getting a worse deal by a half percent than he could have! He said he was departing for a trip out of town and was in a hurry, and when Wells Fargo told him he could apply over the phone and pushed him to do so, he just did it. But after less than a week he was sorry he had done so.
This mortgage borrower wanted to refinance a $530,000 loan and he owned a 2 unit home. Wells Fargo said that although it was a 2 unit home, that they could get it appraised as a single family with an “in-law suite”, and that would be better because a 2 unit appraisal was about $150 more than a single family appraisal.
What the geniuses at Wells Fargo did not tell him is that defining the property as a 2 unit, while it does indeed cost $150 or so more for the appraisal, also gets a loan classified as a Conforming loan (Fannie Mae allows loans as high as $533,850 to still be called “Conforming” on 2 unit homes. As a single family a loan over $417,000 is classified as a Conforming-Jumbo, and is a higher interest rate. The difference is that he could have gotten 4.375% on a Conforming loan the day we spoke versus the 4.875% Wells Fargo was charging him on a Conforming-Jumbo/single family loan. That .5% in higher rate will cost approximately $156/month extra, $1872/year or $9,360 over 5 years.
Many times the people on the other end of the phone at big banks are more clerk and less mortgage professional, and don’t have the in-depth knowledge to construct the deal in the way that a seasoned loan officer might, to try and give the consumer the best deal. And even if the person on the other end of the 800# at a big bank is a licensed loan officer, they likely have very little experience, and may end up costing the consumer money by mistakenly putting the client into the wrong mortgage product.
As I said in the beginning of this blog, and as I end many of my blogs, ask a lot of questions, on any transaction make sure you are dealing with someone experienced, and take your time and make a careful decision after educating yourself as much as possible.