4 tips to avoid being overcharged
The risk arises with LOs who can't beat the price you bring to them, which is highly competitive, but prefer to resort to one or more stratagems to retain your business rather than withdraw gracefully. Salesmanship is part of an LO's stock in trade.
On a purchase transaction, the LO can agree to beat your price but stretch out the paperwork past your point of no return, where your closing date is too close to begin again with another lender. You will then end up with a higher price.
The best way to deal with this danger is to develop an agreed-upon timeline with the LO that will leave you with enough time to begin again elsewhere if the LO doesn't deliver.
On a refinance, the LO may attempt to cast doubt on the validity of your "Internet price," which has not been locked, and offer to put your mind at rest by locking you immediately at a higher price. It would be a mistake to underestimate an LO's powers of persuasion.
Particularly unscrupulous LOs may offer to lock you at a lower price but don't. If the market price drops, they lock then and collect their commission. If the market price doesn't decline, they find something wrong with your application to squelch the deal. This won't work if you demand to see the lock confirmation statement.
Needless to say, none of these risks arise if you select a lender offering loans on the website you used to find your price.
The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.
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