Let Family be Family, Leave the Lending Business to the Banks

I remember when I was in high school and Friday night rolled around.  As most 17-year-olds, I was as broke as an old clock.  And, WOW, what $20 could buy in 1985.  So like most young kids do, I asked Banco Padres (the parent's bank) for $20 on a regular basis.  And it wasn't a loan for $20, because if it was then I defaulted on every single one of them.

So when is it time to stop asking family and friends for money?  It's my opinion that you should never, ever ask anyone other than a bank or some other form of official lender for money, ever.  Here's why...

1. Most "loans" are paid back under the terms of a promissory note.  Borrowing dough from mom and dad is not.  It's paid back under some loose assumption of terms, which often leads to misunderstandings and hurt feelings.  And nothing makes Thanksgiving dinner more uncomfortable than the elephant in the room, which is "the guy carving the turkey owes me $10,000."  


2. Co-signing is a temptation, which is fraught with peril.  Co-signing for a loan or anything for that matter is the financial equivalent of getting married.  You are officially connected and getting disconnected, which might seem really attractive, is next to impossible.  Lenders love two liable parties instead of just one.


3. "He who gets gypped has the memory of an elephant."  Notwithstanding the fact that I've now mentioned elephants twice in this article, the quote rings true.  I can't remember who gave me what at my wedding, but I sure can remember the folks who gave us nothing.  It's human tendency to remember these things and nothing is worse than the constant memory of getting ripped off, by a loved one.


4. Save the lending to the lenders.  Lenders are expected to be cut throats.  They'll report you to the credit bureaus, hire collectors to track you down, and might even sue you for delinquencies.  Do you really want to put your loved ones in that position?

Here's my suggestion, if you are seriously thinking of letting someone borrow money, just let them have it.  That way there's no expectation of getting paid back so there are no hurt feelings when the checks don't roll in.  But even then I'd think twice.  You're enabling irresponsibility by letting someone borrow or have money, plain and simple.  True example, a buddy of mine's father in-law borrowed $100,000 from my buddy's father.  He did this under the guise of saving his home and business.  Of course after he renewed his country club membership with a sizable chunk of the money it became quite obvious that he had no intention of handling the money as he had represented.

Let the banks be banks.  You be a friend or relative...and neither the two shall (or should) meet.

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.

What Not To Do When In Escrow

One of the old home-buying bugaboos from years gone by has reasserted itself.  In the normal course of events, people buy a home and 30 or 45 days later their loan funds and they move in. What happens occasionally is that people will incur additional debts, and the additional payment on those new debts affects their qualifying. 

I can remember one instance where a guy who was marginally qualified went out and leased a new Mercedes Benz with an $800 per month payment. That additional payment almost sank him until we got a letter from his employer stating that it was their intention to reimburse him 100 percent for this expense. One other time, an about-to-be housewife thought of all the furniture she wanted and instead of waiting until escrow closed, went and bought it all.

Most of the time, even if people did this, it wouldn't matter because we had the credit report from before and, frankly, no one knew about it. But cases in which there was a long period between pre-approval and when escrow was ready to close, the credit report would "expire" after 90 days and we'd have to get a new one. The new debts would show up on the new report and we'd have to re-underwrite the file.  Most of the time it didn't matter, but it could.

Fannie Mae has indicated that they will begin requiring lenders to update the credit information right before loan funding. It applies to all laons and I simply cannot imagine that this is a BIG problem. But some bean counter back at Fannie Mae sees that it happens once in a while and all of a sudden they have an opportunity do make a new rule.

It's also not clear who will pay for it because by this time, all the documents have been drawn and the numbers can't change. But the cost is likely to be huge. Even if it's a cheap $10 report, were talking 10 times 10,000,000 loans every year. That's one hundred million dollars and you can bet neither Fannie Mae nor lenders will be eager to eat that! They will pass it on to you.

This also means that some people are going to get caught in a situation where their new debt means they no longer qualify for their mortgage and the deal will blow up. That's a whammy!  In all likelihood, they will also forfeit their earnest money, which will be retained by the seller. That's a double-whammy.

Most people aren't on the edge, but even well-qualified borrowers who incur new debt might find their loan closing delayed as their lender re-underwrites the file. Even this is hard to explain to an anxious seller.

So if you are buying a home, resist all temptations to go open a new account or buy something.  No new cards, no new things, no new debts, no new credit inquiries. Nothing! Zip! Nada! Zilch!

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

More Folk Wisdom on Getting Mortgage-Savvy

Mark Twain is another wonderful source of great quotes that cut to the heart of issues. He was perhaps the first author to get to the heart of America's belief structure with finely drawn characters that inhabit his two most popular books "The Adventures of Tom Sawyer" and "The Adventures of Huckleberry Finn."  His remarkable insight also led him to give some great quotes. Here's one of my favorites:

"It ain't what you don't know that gets you into trouble.

It's what you know for sure that just ain't so."

This is certainly true in the homebuying process. Out of my more than 4,500 clients I think I can safely say that in a majority of cases, I had to help them "unlearn" something that was not true.  You can't build a structure of good decisions on a foundation of factoids.  For those who don't know that word, it's a word coined by Norman Mailer. The Washington Post described it as:

"something that looks like a fact, could be a fact, but in fact is not a fact"

Some of these factoids were perhaps learned at a prior time when the world was a different place than it is today.  As I look at the cycles of the last 30 years, I can assure you that each five-year period was remarkably different than the one before it. Today the landscape is so totally different that almost anything you learned before is obsolete.

The other thing that is important to understand is that borrowers think that because they got a loan before that they can do it again. In many cases, if not most, that just means they will repeat the mistake they made the first time, perhaps with another new mistake thrown in for good measure.

Of course, the tricky thing in this whole process is that most borrowers do not know that they made a mistake. That falls under another great quote, attributed to Thomas Grey.

"When ignorance if bliss, ‘tis folly to be wise."

Well, my friends, ignorance is certainly not blissful. Even worse, it is expensive.  When you are buying a $400,000 home, one single mistake most people make can easily cost $7,000.  If it's an $800,000 home, you're talking $14,000.

The problem is that our industry does not offer simple coaching like this: "I have alternative A or alternative B.  B saves you $14,000. Which would you prefer?"  It would be easy if it was like that, but it isn't. You need training and help from an expert.

Bottom line, becoming educated about mortgages can pay big dividends. Read a book, maybe two or three.

 

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

Wisdom from Will Rogers

I have a collection of sayings from this wonderful American bard. This is one of my favorites:

There are three kinds of men: The ones that learn by reading. The few who learn by observation. The rest of them have to pee on the electric fence and find out for themselves.

When it comes to mortgages and homebuying, fewer and fewer fall in the first category. My publisher, John Wiley & Sons, just reported to me that the sales of all real estate books are off 75% from a few years ago. The sales of my book are off just as badly, maybe worse.  In my local two-story Barnes & Noble store, a mere 4 feet of shelf space is devoted to these books compared with 12 or 16 feet a few years ago.

Learning by the second method could be helpful, but it is nearly impossible to find someone buying a home and follow him around and try to learn from him as he does it.  No one does that and, unlike the obligatory "birds and bees" discussion, it doesn't seem to be a task that parents take on.

Most people seem to be in the third category. Obviously prominent among them are those who bought a home they could not afford, got a toxic mortgage, or more likely, both.  Millions of those people have been foreclosed upon or are going to lose their homes in the next few years. And I can practically guarantee you that almost none of these people read a book about mortgages and homebuying beforehand.

These people went through the process not even realizing at the time that they made a number of costly mistakes. In most cases, as escrow closed they were still totally clueless.  They didn't read or understand the purchase contract, the escrow instructions, the loan disclosures, the loan documents, or the final closing statement.  They just worried about, "When do I get the key?"
 
So where did they get their information?

Nowhere.  They had none. In reality, they had an encounter with an electric fence. They just didn't understand it at the time. In fact, many of the forces that got them into trouble – specifically greedy real estate agents and slimy mortgage loan officers – not only didn't want them to understand, they went out of their way to make sure that the people DIDN'T UNDERSTAND what they were doing.

Had the homebuyers really understood the implications of what they were signing, they would have aborted the transaction and no one would have made any money.

So whatever you do, especially when buying or refinancing a home, get educated about it. Start by visiting your local library or bookstore.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

More Feeble Action on Foreclosures

The White House announced another program designed to help homeowners headed for foreclosure.  In addition, the nation's largest loan servicer has swung into action with a new program that promises some possible relief by reducing the balance owed on a homeowner's mortgage.

The government’s new program is specifically targeted at homeowners who are behind on their mortgages due to unemployment. Borrowers have to be collecting unemployment benefits and be less than 90 days late on their mortgages. The program does not provide forgiveness, as any missed payment will be tacked on to the loan balance to be paid later.  It is not clear whether homeowners whose unemployment benefits have terminated will also be helped.  While this is good news for a small slice of those borrowers in distress, it does not address the needs of the millions of people facing imminent foreclosure.

Another program, again one that is narrowly defined, is designed to help homeowners whose homes are slightly under water. If the old lender is willing to forgive debt that exceeds 115 percent of the home's value, the government-controlled FHA program would issue them a new fixed rate loan.  At that loan-to-value, borrowers are untouchable under loan standards now in place. The borrowers would need to qualify for the new loan payment, but it gives them a presumably lower payment and a risk-free loan.

The government also acknowledged that out of 1.1 million borrowers who had been offered temporary modifications, only 170,000 people successfully transitioned to a permanent modification.  This number is further evidence that the foreclosure prevention programs have not been well designed.

Bank of America is offering borrowers holding so-called Option ARMs the ability to get a new loan, one with a principal balance as much as 30 percent less than their current mortgage balance, if they are under water. Of the forgiven loan amount that would be set aside, 20 percent would be forgiven each year if the borrower continues to make payments. At the end of five years, the entire amount would end up having been forgiven.

This is another very modest program whose borrowers must have a specific type of loan, be behind in their payments, and have a loan balance greater than the value of the home. Not to mention that 45,000 is a small percentage of the well over 1 million of the bank's loans that are currently more than 60 days delinquent.

This program will not likely hurt the company's earnings as, according to the 2009 3rd Quarter 10Q filed with the Securities and Exchange Commission: "Certain acquired loans of Countrywide that were considered impaired were written down to fair value at the acquisition date."

It's worth noting that Bank of America had previously entered into an agreement in 2009 with the Attorneys General of most of the states that set aside more than $8 billion dollars to re-write the loans of these same types of borrowers, holders of Option ARMs. The bank has never reported statistics on the progress or performance of activities under these agreements.

The government and the industry keep waltzing around the edges of the problem. They are helping borrowers by the tens of thousands, while some analysts say that as many as 12 million borrowers are facing foreclosure over the next three years.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

Foreclosures Putting Condos at Risk

A key element in the value of a condominium unit is the value of the individual unit owner's pro-rata share of the common area owned by the homeowner's association. What’s also critically important is the financial condition of the association. Associations operate at break-even financially, allowing for adding to the replacement reserves.

But because of the large number of foreclosures that have been, are, and will be going on, there exists the potential that not enough owners will pay their dues – and you can't have a viable association if owners aren't paying dues. If you own a condo unit, or are considering buying one, be aware that this scenario can have serious implications.

The first: the remaining owners have to pay increased dues in order to make up for the shortfall caused by the delinquent homeowners. They won't want to do this for long.

The other implication: the association’s financial straits could drive away new buyers for the units. In fact, an otherwise well qualified buyer might find a lender won’t approve a loan for a condo unit in a development that isn’t financially stable. That's because a lender does not want to potentially end up having to foreclose and get stuck with a property that they could not sell (at any price).

Associations with a large number of non-owner occupied units (units owned by someone but rented out to another party) are of particular concern. An investor-owner does not have the same kind of emotional attachment to such a property because it is not his or her home. As a result, an investor-owner might be motivated to just walk away from the unit if he or she owes more than the property is worth, is not getting enough rent in to cover the mortgage payment, taxes, and association dues – and can’t see any prospect for recovering the equity.

Currently, these associations are undergoing a high level of scrutiny by lenders. One lender we work with will not do a loan if the number of delinquent owners exceeds 15% of the total number of units. If you are a buyer, obtain this information, as well as the current operating budget and most recent financial statements, before making an offer. If you are in escrow, it is more important to get verification of these facts early on in the process, even before ordering an appraisal. Be sure to discuss this with your agent ahead of time.

If you own a unit in a condominium, pay particular attention to the financial statements from your association's management company. The delinquent dues should be reported on this statement. You should also know the number of non-owner occupied units in the project. If there is a problem, it's better to take action sooner rather than later.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

Running Scared: Challenges in Mortgage Processing

I have always felt that a business relationship is based upon mutual respect, but recently the relationships between companies in the lending field has almost become combative. Although everyone wants to do business, everyone is afraid of getting stuck with a loan that they cannot sell to the next company up the line. If they are stuck with such a loan, they will likely have to sell it to someone else at a loss.

The bizarre thing is that this isn't happening because of any deterioration in loan quality. By "quality" I mean that the borrowers make the payments on time and ultimately they pay back the money borrowed. It is virtually impossible to originate a bad loan today. Why?

Appraisals must be ordered through an Appraisal Management Company, a virtually fraud-proof, anonymous process.

Every borrower must sign a Form 4506T that allows the lenders to get a summary of the borrower's last two year’s 1040s -- and you cannot lie about income without risking major fallout with the IRS.

The credit report is the third part of the process and it is also fraud-proof.

So how do you do a bad loan? You can't. In fact, according to people who keep track of such things, every indication is that the initial quality of loans is higher than it has been in years.  I'd bet that these loans will have a very low default rate.

I am suggesting that the Quality Control auditors won't be able to find out anything wrong with the loans. So what are they doing? They are rejecting loans for the most trivial of reasons, the inconsequential things that should be overlooked. The people who process loans are covering their behinds for fear of being fired.  Believe me; that is exactly what they are afraid of.  

We had one loan that got caught cross-wise because when the appraiser measured the house, he came up with a larger area than the County records show. What likely happened was that the County made a mistake back in 1987 when the house was built. Appraisers tell me that happens all the time. But the assumption the underwriter made was that the owner had made an "unpermitted addition" that cannot be counted in the value. I had to "prove" that such addition hadn't been made. Do you realize how hard it is to prove something that didn't happen?

In another case, the borrower's name on her insurance coverage did not include her middle initial. The loan documents had her full name, so this didn't conform. Was this important? Not at all. Was her insurance coverage invalid because of the lack of a middle initial? Of course not.

Finally, we have these new Good Faith Estimate and Closing Statement forms that are creating most of these problems. 

This is supposed to be a "zero tolerance" policy and funding was held up because there was a discrepancy of $10 between the appraisal fee as shown on the estimated closing statement and what the funder thought it should have been. Obviously, $10 is irrelevant and what "zero tolerance" really means is that in the worst case I would have had to come up with it. But her interpretation of "zero tolerance" was that was a mistake in the loan funding, so she didn't fund it.

If you are about to get a loan, brace yourself because this will happen to you. Just don't get angry if and when it does. Just get what they ask for. It'll be easier than fighting it.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

Reality Check: Appraisals

As everyone knows, Congress is working on a new set of laws to regulate all aspects of the financial services industry. Last I heard, the document was over 1,100 pages long and it is frightful to think of what the law will be when Congress finally gets through with it. After all, the mortgage industry is currently having trouble digesting the last changes in regulations.

The first of these new mortgage industry regulations was the Home Valuation Code of Conduct (HVCC) that became effective on July 1, 2009. It was supposed to "clean up" the appraisal process by having appraisals ordered through independent Appraisal Management Companies. These were not actually required by law but were adopted by Fannie Mae and Freddie Mac after the Attorney General of New York, Andrew Cuomo, twisted their arms.

Exactly why the Federal Housing Finance Agency that supervises Fannie Mae and Freddie Mac didn't say, "Hey! Wait a minute. That's not your job! We regulate these enterprises, not you; if you think something ought to be done, make your proposal to us." But Fannie and Freddie were reeling from years of mismanagement and losses that wiped out their shareholders. I suspect they just had no will to resist. What was more likely was that their regulator's leader, James B Lockhart III, dropped the ball and let someone else usurp his authority. In fact, in an ironic twist of fate, the administrator who oversaw two of the largest corporate collapses in American history now works for a private company that helps companies that need restructuring.

The effect of HVCC has been that these intermediaries interposed themselves in a system at a cost of between $100 and $150. Lenders order from an AMC that, in turn, orders from a list of appraisers. This was a pricewise competitive business before, so one of three things had to happen.

The appraiser would be paid a normal cost minus the AMC's fee that would be deducted from the cost charged to the customer. That would mean the appraiser makes $100 to $150 less. Or the cost of the AMC would be added on to a higher price of the appraisal so that the consumer pays more. The third alternative would be that only newer, less experienced appraisers would work for such small fees. In practice, all three have happened.

Let me insert a little information here. According to statistics complied by alamode, inc., publisher of appraisal software, the average price for appraisals in my county was $375. By comparison, I have a fee schedule that one AMC uses to establish what they will pay. This is the schedule:

	One Unit Full Appraisal
Tier 1	$225.00
Tier 2	$250.00
Tier 3	$300.00

You can see easily that the appraiser's income will be 20 percent to 40 percent less than the old days if the AMC charges market price for appraisals. That is about what they earned back in 1982. In my view, no good appraiser can afford to work for that small of a fee.

Sometimes the AMC charges more. One lender has its own captive AMC and they now charge $475 for a standard appraisal.

The third case was amply demonstrated by an appraisal we received in early January. It had problems that were ultimately solved, but when I looked at the appraiser's state license, it showed that the appraiser got his license in September. He had three months on the job!  In the old days, an appraiser couldn't get in the list of approved appraisers unless he had at least two years' experience.

I shudder to think what the scene will be like a few years from now, but my guess is that many competent appraisers – the backbone of the industry – will have changed careers, a tragic loss.

It is clear to most of us in the mortgage industry that neither consumers nor investors are better protected by this process. I doubt that the complaints from consumers, lenders, and appraisers will have any effect on efforts to change the system either.

The only good thing is that they didn't make us order appraisals from the Post Office, but maybe that's next. After all, who knows the neighborhoods better than the letter carriers?  

As a consumer, you just have to add one more "potential problem" to your list of things to worry about in the mortgage industry.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

The High Opportunity Cost of Procrastination

Borrowers are always concerned about what it costs to get a loan, as they should be. In the case of a purchase, they have to get a loan because they need the money to finance the property. The costs of the loan are just part of the purchase price of the home. They still ought to be careful shoppers, but they don’t have a choice as to whether to get a loan or not.

In the case of a refinance transaction, it's different. In this case, it's not mandatory that a borrower refinance. He should do it only when the sum of all the benefits is greater than the cost of the transaction.  Most borrowers have a tough time calculating the benefits, and it seems as if they don't ask much about that. What they certainly can ask is, "What are the costs?"

Now, what they are thinking about are the points, processing fees, lender underwriting fees, title insurance fee, settlement agent fees, and the like -- what I will call "hard costs." But almost no one EVER thinks about "opportunity cost." What's that? Let's discuss further.

A prospect was in my office today wondering about a refinance. That's a good thing, because he is paying 6.25 percent now and we could get a 4.75 percent loan. But he wasn't asking about that. He asked about the costs.

I asked him why he did not refinance a year ago when rates were about the same as today. Quite sheepishly he admitted he had procrastinated. That's okay. We all do that sometimes. At the time, it always seems as if you can procrastinate for free, but in case it wasn't free at all!

The cost that never occurred to him was the "opportunity cost." His failure to act and refinance a year ago resulted in his paying an extra 1.5% in interest for one whole year, a total of over $2,000. That is just as much of a dollar cost as those "hard" costs, but the opportunity cost just isn't as visible.

Even if we assume that he gets a loan that is 1/8th of a percent cheaper than he would have a year ago, that saves him $20 per month. It will take him over 8 years just to re-coup that $2,000 in extra interest he paid. That's what his procrastination cost him.

I think that an important part of my job is to help get my clients act when it is in their best interest, to jar them off of dead center. I do that best by helping them better understand the benefits they are passing up because of their procrastination. This was something I was not able to do this morning with this client, and sadly, he left without acting. Maybe tomorrow he will be more motivated. 
 
So, I hope you now have a better understanding of opportunity cost. If you have been procrastinating in moving ahead on your refinance, I hope you will consider this lesson and move ahead more boldly.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

Shopping for a Mortgage 101

I have spent 30 years shopping for mortgages for people who think, quite correctly, that I can do a better job of it than they can.  But every once in a while I get someone in my office who is literally unable to comprehend that my 30 years of expertise can be of any benefit to them.  They invariably have a yellow pad of paper and they want to know "the facts."

Almost invariably, these folks are the analytical types, engineers, accountants, and so forth. These are people who are used to looking at the bottom of a page and coming up with a number. Important concepts like honesty, expertise, and trustworthiness seem irrelevant.

In some cases, they may have done enough shopping so that they say they know what they want, say a 30-year fixed rate loan at 5 percent with zero points. That choice is invariably the wrong one but they don't know that. 

Their thinking is that if they nail down the rate and fee, then the only other variable is lender costs, what we in the industry call garbage fees. Sounds logical, doesn't it. Then you just have to call a bunch of lenders and ask them what their fees are. The problem is that it is NEVER this simple. 

This is a complex business, so complex that I wrote a 256 page book and over 400 articles, something like 500,000 words of advice. My book  How to Save Thousands of Dollars on Your Home Mortgage is packed with secrets ways I have of saving people money.  If shopping were as simple as my shopper thinks it is, I could have published a book with only one-page!

The ways I know about how to save money are NEVER even on the radar screen of the analytical guy. These clever ways of saving money are a result of my having done 5,000 loans. My expertise manifests itself as I teach people things that are new to them.   Many, many clients have said so often, "I never looked at it that way." Then I know I have done my job.

Here's the sad thing. There is perhaps $200 difference in lender fees between one lender and another. $200 is inconsequential when you figure he'll spend $200,000 in interest.  Among the lenders I do business with there might be one than charges $200 more than anyone else. BUT we might use him because the points on his loan are 1/8th of a point less. On a $400,000 loan, that's a $500 saving for my client. That more than offsets the $200 extra he paid in lender fees.

The other critical variable in a volatile market is which day to choose to lock in.  I can tell you that a loose-cannon client has about a 20 percent chance of locking in on the day with the lowest rate.  He probably will leave $1,000 on the table by locking on the wrong day.

Now this shopper isn't alone. In fact, most shoppers are naïve. That is why most lenders staff their 800 number call centers with twenty-something people making little more than minimum wage.  They may even quote low fees to get him to apply and then make it up and more in some other way he can't see.

Finally, the reason I will not play the game on his level is that I know that people like this never stop shopping. If I’m $50 low, next week he'll find someone else that will be $50 lower than me and he's gone.

Here's how you should shop. Find an expert and go to his office and say, "You know a lot more than I do about this. How can you help me save money?" 

If your circumstances are identical to our shopper, I can guarantee you that I could show you how to save $5,000 over the deal he ultimately gets. You are a client and I help clients. The other guy is just a prospect. I'm not about to tell him my secrets. It won't earn his loyalty. He would just take my secret down the road to some other lender so I'm not going to let him pick my brains.

So, my way of establishing the "value proposition" is that the client has to attribute value what I as the mortgage broker bring to the table. He has to WANT my help.  A good shopper wants find the best and most affordable approach for his particular situation – and that's not a simple, cut-and-dry process.

In summation, find someone who knows these secrets and get their help. You might start out by buying a book and reading about the home buying process. Of course I recommend my own highly-praised book. I have heard from countless people, "After reading your book, we think we know more than our loan officer."

Sad but true.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.