Mortgage Insurance & Other Rip-Offs
by Craig Goebbel
President & CEO, LoanTek, Inc.

Getting a home loan is usually a stressful procedure for most of us. Even with the streamlining of loan approvals and the other benefits of modern technology we still fret over the details of the mortgage transaction, and rightly so. For most people a home loan is the single largest financial commitment we will make in our lives and paying attention to the details is important. What I find interesting are the things many people think are rip-offs. They deserve to be talked about.

Mortgage Insurance – This is the biggest source of frustration for borrowers. Their attitude is “why do I need to pay this, you are just making the mortgage insurance company’s rich?” As for the why, Fannie Mae and Freddie Mac require mortgage insurance for any loan greater than 80% of the value of the home. FHA and VA also require mortgage insurance. Do you have 20% down for your purchase? If you don’t, you can continue to rent or take advantage of mortgage insurance and become a homeowner.

Mortgage Insurance is not a rip-off; it is a great tool allowing you to buy a home with a low, or no down payment.

Flood Fee – We get a lot of comments on this one. Everything from “my home is on top of a hill” to “I just had a flood determination six months ago.” I understand your frustration but it is required by all lenders prior to getting a loan. Why? You need to know if you are in a flood zone and so does the lender. If you are not, great! If you are in a flood zone you can get the FEMA flood insurance to cover flood losses your homeowners insurance won’t. Why do we get it on every loan? Because the flood determination document goes with the new loan and it has to be up to date. There is another reason we do it. The courts decided it is the lenders obligation to notify the consumer of the flood zone status of the property. It we don’t and you are in a flood zone and suffer a flood loss, you can seek compensation from us. The one-time only flood fee is truly a case of an ounce of prevention.

Tax Service Fee – The lender needs to know if you are keeping your property taxes current. The tax service company notifies us of this. If we are collecting and paying property taxes for you, we will send the county thousands (sometimes millions) of dollars for thousands of borrowers. We need to know the county got it right and properly applied the money to the right parcels, including yours. Again, this is a one-time fee that protects you and us from errors.

© 1999 - 2004 LoanTek

Craig Goebbel is President and CEO of LoanTek.com, mortgage loan brokerage.  He is also producer and host of Real Estate Radio Show, a Seattle-based talk show featuring mortgage and real estate news, interviews and listener calls. It is broadcast on KVI Radio AM 570 in Seattle, Washington. Past show are also webcast via the Internet at http://www.realestateradio.net.

Real Estate Radio Sponsor

Real Estate Radio with Goebbel and Gray is the leading real estate radio talk show in the world and is hosted by Real Estate home mortgage expert Craig Goebbel, owner of LoanTek Home Loans and Robb Gray of John L. Scott Real Estate.