Good Faith Deposits and Other Upfront Fees
Don't Pay Up Front Fees to Your Lender
It's a Risk You Don't Have to TakeAccording to Webster's Dictionary: de-posit (di-poz-it)
- To place for safekeeping, as money in a bank.
- To give as partial payment or security
- Something entrusted for safe keeping, esp. money in a bank
One of the biggest tricks used by online lenders is the Deposit. At some point, usually in the beginning phases of the loan, you are asked to pay the lender you are talking to a large, non-refundable fee before they will begin processing your loan application. These fees normally average $500-$700 and are said to offset "costs incurred" such as appraisal and credit report. $500? This is at least 10% of the total cost of the transaction. Credit reports cost around $12.50, not $500.00. However if a lender is being honest, they will admit the "deposit" is really a commitment to do business - but a commitment on the borrower's part, not theirs.
And now the catch. Once you pay the deposit, if you change your mind or go with another lender you will lose your deposit money.
Deposit or Fee?
A deposit, if non-refundable in any way, cannot be called a deposit. It's a fee. And if there is any security or safekeeping, it is the lender's security not yours. When you pay any lender, broker or bank any up front fees or deposits you are risking your hard earned dollars and falling into a pre-designed trap. If you are asked for your credit card to make a deposit on a loan transaction you are being set up-plain and simple. There is no reason to collect payments from your banking customers other than reasons which serve the bank, not the customer.
Do you go to the grocery store and pay a 10% "commitment to buy groceries fee" before you shop? What if you went into a restaurant and before you were given your food you were asked to pre-pay 10% of your bill - just in case you changed your mind at the last minute and decided you didn't want to eat. Would you feel comfortable?
Pay Before You Eat?
Any lender or broker which establishes a policy of charging their customers up front application fees or deposits does this because they have business practices which routinely provide their customers with motivation not to close their loans. In other words, a restaurant which charges 10% of the bill before you see the food is one which knows you may not want the food when you finally see it.
Getting a mortgage is not buying a product, it's primarily a service; therefore you should choose carefully which service provider has your best interests. Business practices such as non-refundable application fees and deposits are clear evidence those companies do not have their customer's best interests first in mind.
Keep Your Wallet in Your Pocket
Not all loans close. Sometimes people change their minds. They say "you win some and you lose some" right? Keep your wallet in your pocket - we trust you.
We suggest you choose a lender or broker willing to work with you based on the time honored tradition of trust and good will.