You hate it, don't you? You found, without a doubt, the absolute lowest interest rate on the planet. Not just that, but the loan company had no fees whatsoever. You could hardly lose, right? Except for the fact that now the loan papers you're looking at appear nothing like what you agreed to. Your interest rate is higher than what you locked, and your closing fees are about $3,000 higher than your Good Faith Estimate. What do you do? You have to close on your house, right? Don't loan companies have to follow certain laws?

Of course they do. But sometimes, what does it matter if they don't?

The advent of the Internet has allowed for two things - more consumer choices and more consumer headaches. Now, lenders in one part of the country can advertise, with little or no expense, in areas outside of their geographic area. And those companies know that in order to get a consumer to apply for a loan with them, they just might need to be very aggressive on rates and fees. How aggressive? How about “no way is that available” aggressive. Face it. If you want to get a rate offered nowhere else on the planet, then you might be working with a loan company two time zones away with a name you've never heard of.

Disclaimer. Just because you find someone on the Internet with a fantastic offering and you've never heard of them doesn't mean they're crooks.

To continue. Let's rewind to the part where you're at your closing and the numbers you're looking at don't add up to what you were originally disclosed. What do you do? Two immediate choices. Walk from the table and cancel the closing. Of course, there are a few others that may be impacted by this decision. Primarily the seller of the property you're about to buy. Second, you can call the loan company and tell them there's been some mistake and to send the corrected papers to you. Hopefully, that's what will happen. But what if they say, “I'm sorry, there is no mistake. The papers you have are the correct ones.”

If you've been misled, know that there are Federal Guidelines that lenders must adhere to, along with a bevy of State regulations. One of the most important guidelines is to provide you with an estimate of settlement charges you can expect at closing. The company must not only provide this estimate but must do so under good faith. How good faith? If your APR is more than 1/8% above what you were originally quoted, the loan company could very well be in violation of Federal Statute.

But any lender can do that, right? Not just ones that are far away. The bank across the street is just as capable of misrepresentation as someone in Switzerland. It's just that the bank across the street has a lot more to lose if their reputation goes bad. Remember that if you get something too good to be true then ask yourself “what if this is all wrong at closing?” That may help you determine your lender of choice.

Published: March 7, 2002

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, a veteran Mortgage Banker, successful Real Estate Consultant and author of Your Guide to VA Loans, Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan, Who Says You Can't Buy a Home!, and Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You, is a former columnist and Contributing Editor with San Diego-based Mortgage Originator Magazine. Reed is President of CD Reed Mortgage Bankers, Austin, TX and is a Past President of the Austin Mortgage Bankers Association.