Many home buyers secure their home loans before they select their real estate agent. While this may be the first step in the home buying process, it may be a mistake to make any major loan decisions without the assistance of an experienced buyer agent. You should be concerned when asked to pay a significant sum of money for loan application fees, as once you do this, you tend to be locked into their loan and/or lose this money if you don't purchase a home.

The mortgage industry is a very competitive industry, consisting of many companies that have gained fine reputations and some companies who will take advantage of customers to make an extraordinary financial gain. To secure business some companies advertise low interest rates with the intent of making up the loss on low interest rates by adding hundreds of dollars in junk fees as closing costs to the loan.

A rather frequent practice that has happened in the Kansas City market is the setting up of a mortgage business that intends to fleece home buyers. These companies will spend considerable sums of money advertising, often focusing the ads on the population that has problems getting home loans. Their business practice has been to charge high application fees, then delay the approval of loans. Often what happens is these companies will close their business or the State Attorney will close down the business, leaving the customer with losses of a thousand dollars or more.

Examples of other problems our agents have found:

	A client secured his loan through a company managed by an acquaintance of his. When the buyers agent reviewed his estimated closing statement it revealed a charge of $1,600 of junk fees that most other loan companies would not have charged. This was on a loan of less than $70,000. Upon the threat of moving the loan to another company most of the $1,600 overcharge was eliminated.
	Other buyers had a number of debts that they wanted to consolidate into one loan in order to qualify for a larger home loan. A company approved them for a $141,000 purchase with the intent of adding approximately $15,000 to the loan principle to cover the debt consolidation. It appeared to be a great loan, even with the knowledge they would be paying a high risk rate of more than 11%. When the buyers agent read the loan agreement he discovered that a prepayment penalty could be charged which would make refinancing in the near future impractical. In addition it would take several years for the home value to increase to an acceptable appraisal level for refinancing. Rather than to take on this kind of liability, the buyers were advised by the agent to find other ways of consolidating the loan.
	A more extreme case was an incident where a former client was in the process of refinancing when an agent doing a follow-up call learned she was refinancing. The agent offered assistance which was gladly accepted. In a review of the loan, it was discovered that the unscrupulous loan officer was charging the maximum 10 discount points allowed on loans. This added $18,000 to the loan principle. The client was never informed about the $18,000 being added to the loan principle. Paying discount points to reduce the interest rate is sometimes advisable, however in this case the client was to be charged an interest rate over 9%, with the current market rates at 7%. Needless to say, this national company which advertises their great rates on television did not get the loan.